View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

ANNUAL REPORT
OF THE

FEDERAL

TRADE COMMISSION
FOR THE

FISCAL YEAR ENDED JUNE 30

1942

UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON: 1942

For sale by the Superintendent of Documents, Washington D. C.

- - - - Price 20 cents (paper)

FEDERAL TRADE COMMISSION
WILLIAM A. AYRES, Chairman 1
GARLAND S. FERGUSON
CHARLES H. MARCH
EWIN L. DAVIS
ROBERT E. FREER
OTIS B. JOHNSON, Secretary
FEDERAL TRADE COMMISSIONERS--1915-42
Name

State from which appointed

Joseph E. Davies
Edward N. Hurley
William J. Harris
Will H. Parry
George Rublee
William B. Colver
John Franklin Fort
Victor Murdock
Huston Thompson
Nelson B. Gaskill
John Garland Pollard
John F. Nugent
Vernon W. Van Fleet
Charles W. Hunt
William E. Humphrey
Abram F. Myers
Edgar A. McCulloch
Garland S. Ferguson
Charles H. March
Ewin L. Davis
Raymond B. Stevens
James M. Landis
George C. Mathews
William A. Ayres
Robert E. Freer

Wisconsin
Illinois
Georgia
Washington
New Hampshire
Minnesota
New Jersey
Kansas
Colorado
New Jersey
Virginia
Idaho
Indiana
Iowa
Washington
Iowa
Arkansas
North Carolina
Minnesota
Tennessee
New Hampshire
Massachusetts
Wisconsin
Kansas
Ohio

Period of service
Mar.16, 1915-Mar. 18, 1918.
Mar.16, 1915-Jan. 31, 1917.
Mar.16, 1915-May 31, 1918.
Mar.16, 1915-A p r. 21, 1917.
Mar.16, 1915-May 14, 1916.
Mar.16, 1917-Sept. 25, 1920.
Mar. 16, 1917-Nov. 30,1919.
Sept. 4, 1917-Jan. 31, 1924.
Jan. 17, 1919-Sept. 25, 1926.
Feb. l. 1921-Feb. 24, 1925.
Mar. 6, 1920-Sept. 25, 1921.
Jan.15, 1921-Sept. 25, 1927.
June 26, 1922-July 31, 1926.
June 16, 1924-Sept. 25,1932.
Feb.25, 1925-Oct. 7, 1933.
Aug. 2, 1925-Jan. 15, 1929.
Feb.11, 1927-Jan. 23, 1933.
Nov.14, 1927,
Feb. 1, 1929.
May 26,1933.
June 26, 1933-Sept. 25, 1933,
Oct.10, 1933-June 30, 1934.
Oct.27, 1933-June 30,1934.
Aug. 23,1934.
Aug.27, 1935.

EXECUTIVE OFFICES OF THE COMMISSION
Pennsylvania Avenue at Sixth Street, Washington, D. C.
BRANCH OFFICES
45 Broadway, New York
55 New Montgomery Street,
433 West Van Buren Street,
San Francisco
Chicago
909 First Avenue, Seattle
150 Baronne Street, New Orleans
1

Chairmanship rotates annually. Commissioner Ferguson will become Chairman in January 1943.

II

LETTER OF SUBMITTAL
To the Congress of the United States:
I have the honor to submit herewith the Twenty-Eighth Annual Report of the Federal
Trade Commission for the fiscal year ended June 30, 1912.
By direction of the Commission:
WILLIAM A. AYRES, Chairman.

III

CONTENTS
INTRODUCTION
Page
1
2
3
3
4
6
7
9

Duties of the Commission
Summary of legal activities
General investigations
Wartime investigations
The Commissioners and their duties
How the Commission’s work is handled
Publications of the Commission
Recommendations
PART 1. WARTIME INVESTIGATIONS
Priorities investigations
Metal-working machines survey
Industrial corporation reports
Wartime costs, prices, and profits
Household furniture
Bread-baking industry
Paperboard industry
Steel costs
Fertilizer and chemical industry
War material contracts, costs, and production
Production cost accounting methods
Distribution methods and costs
Mass food distributors
Other wartime activities
Advertising analyzed for war agencies
Trade practice work in wartime
Wool Act aids war program
Membership on war committees

11
12
12
15
15
16
16
17
17
17
18
19
20
22
22
23
23
23

PART II. GENERAL LEGAL WORK
Description of procedure
Legal investigation
Disposition of cases by stipulation
Complaints
Orders to cease and desist
Types of unfair methods and practices
Cases in the Federal courts
Tabular summary of legal work

25
28
33
33
37
48
55
64
V

VI

CONTENTS
PART III. TRADE PRACTICE CONFERENCES

Rules of fair competition established
Group I and Group II rules defined
Trade Practice Conference activities during the year
Industry rules in effect and their administration
Informative labeling of consumer goods
Types of practices covered in approved rules

Page
67
68
68
69
70
71

PART IV. WOOL PRODUCTS LABELING ACT
Informative labeling of woolen products benefits public and
business

75

PART V. RADIO AND PERIODICAL ADVERTISING
Special procedure provides continuous survey of published and
broadcast matter

79

PART VI. MEDICAL ADVISORY DIVISION
Furnishes medical Opinions in cases involving advertisement
of food, drugs, devices, and cosmetics

85

PART VII. FOREIGN TRADE WORK
The Export Trade Act
Forty-nine associations operate under the act
Regulation of trade and industry abroad

87
87
89

PART VIII. FISCAL AFFAIRS
Appropriation act providing funds for Commission work
Appropriations and expenditures for fiscal year
Appropriations and expenditures, 1915-1942

95
96
97

APPENDIXES
Federal Trade Commission Act
Other acts administered by the Commission
Rules of practice
Statement of policy

99
107
107
116

Investigations, 1915-1942
Index

117
131

ANNUAL REPORT
OF THE

FEDERAL TRADE COMMISSION
FOR THE

FISCAL YEAR ENDED JUNE 30, 1942
INTRODUCTION
DUTIES OF THE COMMISSION
The Federal Trade Commission herewith submits its report for the fiscal year July
1, 1941, to June 30, 1942. Organized March 16, 1915, under the Federal Trade
Commission Act, which was approved September 26, 1914, and amended March 21,
1938, the Commission is an administrative agency of the Federal Government.
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.
In addition to discharging these duties, the Commission during the fiscal year
directed the work of its investigative, legal, accounting, statistical, and other services
in conducting urgent wartime investigations and studies for the War Production Board
and the Office of Price Administration.
Legal activities of the Commission embrace (1) the prevention and correction of
unfair methods of competition and unfair or deceptive acts or practices in commerce,
in accordance with the Federal Trade Commission Act, in which it is declared that
unfair methods of competition and unfair or deceptive acts or 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 dealing contracts,
acquisitions of capital stock, and interlocking directorates, respectively; (3)
administration of the Webb-Pomerene or Export Trade Act, for the promotion of
foreign trade by permitting, under stated restrictions, the organization of associations
to engage exclusively in export trade; and
1

2

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

(4) administration of the Wool Products Labeling Act of 1939, which became
effective July 14, 1941, and is designed to protect industry, trade, and the consumer
against the evils resulting from the unrevealed presence of substitutes and mixtures in
wool products.
The general investigations arise 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 * * * 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 1 to investigate and
report the facts relating to any alleged violations of the antitrust acts by any corporation.

SUMMARY OF LEGAL ACTIVITIES
The Commission during the fiscal year disposed of more than 1,500 matters which
were in a preliminary stage, either by docketing as applications for complaints, by
progression to the status of formal complaint, by acceptance from the respondents of
stipulations to cease and desist from the practices involved, by consolidation with
other proceedings, or by closing the matters.
The Commission accepted 560 stipulations, 219 pertaining especially to misleading
radio and periodical advertising matter. It issued 249 complaints alleging violations
of the laws it administers and entered 250 orders directing respondents to cease and
desist from such violations.
In the Federal courts during the year, results favorable to the Commission were
obtained in 36 cases: 1 before the Supreme Court, 29 before United States circuit
courts of appeals, and 6 before United States district courts. A circuit court of appeals
set aside 1 Commis1 The Independent Offices Appropriation Act for 1934 provided that future investigations by the
Commission for Congress must be authorized by concurrent resolution of the two Houses. Under the
appropriation acts for 1941 and 1942, funds appropriated for the Commission are not to be spent upon any
investigation thereafter called for by Congressional concurrent resolution “until funds are appropriated
subsequently to the enactment of such resolution to finance the cost of such investigation.”

WARTIME INVESTIGATIONS

3

sion order. Circuit courts of appeals affirmed 15 Commission orders (5 with
modifications) and dismissed petitions for review of orders in 11 cases. Forty-five
petitions for review of cease and desist orders were filed during the year.
At the close of the fiscal year, 49 export trade associations were operating under the
Export Trade (Webb-Pomerene) Act, 8 having been formed during the year.
In addition to administering trade practice rules previously approved for numerous
industries, the Commission during the year promulgated rules for five additional
industries: beauty and barber equipment and supplies; luggage and related products;
rayon and silk dyeing, printing, and finishing; sun glass; and ribbon.
Early in the fiscal year, the Commission issued rules and regulations to carry out the
provisions of the Wool Products Labeling Act, effective July 15, 1941.
GENERAL INVESTIGATIONS
During the present emergency, numerous branches of the Government, especially the
war agencies, have utilized the basic factual accounting, statistical and economic data
covering important national industries which were gathered by the Commission in the
approximately 125 general investigations or studies it has conducted during its
existence. This total does not take into account the 370 investigations relating to
industry practices and to costs, prices, and profits of basic commodities which were
conducted by the Commission during the first World War when the Commission was
relied upon by the Government as its principal cost-finding and fact-finding agency.
A majority of these general investigations were authorized by Congressional
resolutions, some were conducted pursuant to Presidential orders, a number were made
at the request of other branches of the Government, and others on the initiative of the
Commission. Many of these inquiries have supplied valuable information bearing on
competitive conditions and trends in interstate trade and industrial development and
have shown the need for, and wisdom of, legislative or other corrective action.
WARTIME INVESTIGATIONS
During the fiscal year, the Commission conducted 16 investigations, all of which
related to projects in furtherance of the war effort. Thirteen were made at the request
of Government war agencies, including the War Production Board and the Office of
Price Administration. (For details of wartime investigations, see p.11.)

4

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

For the War Production Board, the Commission completed inquiries to determine
whether the steel, copper and copper scrap, copper ingots, jewel bearings, silverware,
and chromium and nickel industries were complying with priority orders issued by the
board. For the same agency, the Commission completed a survey which furnished a
detailed picture of the metal-working machines industry.
Studies for the Office of Price Administration, which provided factual background
for that agency’s price rulings and regulations, included costs, prices, and profits
inquiries into the household furniture, bread-baking, paperboard, steel, and phosphate
rock mining industries.
Inquiries initiated by the Commission under authority of the Federal Trade
Commission Act were coordinated with wartime work to provide data requested by the
war agencies. These were the indus trial corporation reports project, methods of
production cost accounting in manufacturing industries, and methods and costs of
distribution of essential commodities.
The Commission assigned a number of its examiners to the House Naval Affairs
Committee, at the committee’s request, to aid in a comprehensive investigation of the
progress being made in war industries.
An inquiry into mass food distribution involved a study of the economic effects of
the delivery of food to large retailers at their warehouses as compared with delivery
at their stores. This inquiry was not related directly to the war effort.
In connection with its continuing survey of radio and periodical advertising (see
p.79), the Commission, at the request of the Office of Censorship, the War Production
Board and the Office of Price Administration, collected and forwarded to the
appropriate agencies data obtained from war-related advertising illustrative of trends
and prices, or dealing with critical materials, or violative of press and radio wartime
practice codes.
THE COMMISSIONERS AND THEIR DUTIES
The Federal Trade Commission is composed of five Commissioners appointed by
the President and confirmed by the Senate. Not more than three of the Commissioners
may belong to the same political party.
The term of office of a Commissioner is seven years, as provided in the Federal
Trade Commission Act. The term of a Commissioner dates from the 26th of September
last preceding his appointment (September 26 marking the anniversary of the approval
of the act in 1914), except when he succeeds a Commissioner who relinquishes office
prior to expiration of his term, in which case the act provides that the new member
“shall be appointed only for the unexpired term

THE COMMISSIONERS AND THEIR DUTIES

5

of the Commissioner whom he shall succeed.” Upon the expiration of his term of
office, a Commissioner continues to serve until his successor has been appointed and
has qualified.
As of June 30, 1942, the Commission was composed of the following members:
William A. Ayres, Democrat, of Kansas, Chairman; Garland S. Ferguson, Democrat,
of North Carolina; Charles H. March, Republican, of Minnesota; Ewin L. Davis,
Democrat, of Tennessee, and Robert E. Freer, Republican, of Ohio.
Each December the Commission designates one of its members to serve as Chairman
during the ensuing calendar year. Commissioner Ayres has served as Chairman during
the calendar year 1942, having succeeded Commissioner March. Commissioner
Ferguson will become Chairman in January 1943. Through this method of rotating the
chairmanship, each Commissioner serves as Chairman at least once during his term of
office. The Chairman presides at meetings of the Commission and signs the more
important official papers and reports at the direction of the Commission.2
In addition to the general duties of the Commissioners, in administering the statutes,
the enforcement of which is committed to the Commission, each Commissioner has
supervisory charge of a division or divisions of the Commission’s work. Chairman
Ayres has supervisory charge of the Administrative Divisions and the Medical Advisory Division; Commissioner Ferguson, of the Trial Examiner’s Division and the
Trade Practice Conference Division; Commissioner March, of the Legal Investigation
Division; Commissioner Davis, of the Trial and Appellate Division and Commissioner
Freer, of the Division of Accounts, Statistics and Economic Investigations and the
Radio and Periodical Division. The Commission has a Secretary, who is its executive
officer.
Each case that is to come before the Commission is first examined by a
Commissioner and then reported on to the Commission, but all matters under its
jurisdiction are acted upon by the Commission. The Commissioners meet for the
consideration and disposal of such matters each business day. They direct the work of
a staff which, as of June 30, 1942, numbered 684 officials and employees,3 including
attorneys, economists, accountants, and administrative personnel employed in
Washington and in 5 branch offices. The Commissioners hear oral arguments in the
cases before the Commission; usually preside individually at trade practice
conferences held for industries in various parts of the country, amid have numerous
other administrative duties incident to their position.
2 Duties of the Chairman In connection with wartime activities of the Commission are set forth on p.23.
3

Of this total, 53 were on military furlough as of June 30, 1942.

6

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

HOW THE COMMISSION’S WORK IS HANDLED
The various activities of the Federal Trade Commission may be classified generally
under the headings: legal; accounting, statistical and economic; and administrative. 4
The legal work of the Commission is under the supervision of its Chief Counsel, its
Chief Examiner, its Chief Trial Examiner, the Director of its Radio and Periodical
Division, and its Director of Trade Practice Conferences.
The Chief Counsel acts as legal adviser to the Commission, supervises its legal
proceedings against respondents charged with violations of the acts administered by
the Commission, has charge of the trial of cases before the Commission and in the
courts, and supervises the foreign trade work of the Commission as conducted,
pursuant to the Export Trade Act, by the Export Trade Section.
The Chief Examiner has charge of legal investigations of applications for complaint
alleging violations of the laws over which the Commission has jurisdiction, except as
to probable violations which come under the observation of the Radio and Periodical
Division. When the Commission undertakes general investigations, the Chief
Examiner supervises those which are primarily of a legal nature. Certain of the
wartime investigations are conducted by the Legal Investigation Division.
The general legal investigational work of the Commission is conducted by a staff of
attorneys especially trained as examiners who operate from the executive offices of the
Commission in Washington or from its five branch offices in New York, Chicago,
New Orleans, San Francisco, and Seattle.
Members of the Trial Examiner’s Division preside at hearings for the reception of
evidence in formal proceedings and in certain of the general investigations which are
conducted by the Commission. Other members of the division negotiate settlements
by stipulation of applications for complaint, subject to the approval of the
Commission.
The Division of Trade Practice Conferences conducts activities relating to the
formulation and approval of trade practice rules, the holding of industry conferences
in respect thereto, the administration and enforcement of such rules as have received
Commission approval and are in effect, and other staff duties incident to the trade
practice conference procedure. This division is also charged with the general
administration of the Wool Products Labeling Act and the rules and regulations
thereunder.
The Radio and Periodical Division conducts preliminary office investigations in
cases involving allegations of false and misleading advertising. Such cases usually
result from the division’s continuing
4

For special wartime activities, see p.11.

PUBLICATIONS OF THE COMMISSION

7

examination of radio and periodical advertising, and, in a majority of instances, are
disposed of by stipulation. This division also carries on a special continuing
examination of war-related advertising. (For details, see p.22.)
The Medical Advisory Division furnishes to the Commission or any of its branches
professional opinions in matters involving the validity of claims made by advertisers
of food, drugs, cosmetics, and devices in connection with cases instituted under the
advertising provisions of the Federal Trade Commission Act.
In addition to receiving scientific advice from its Medical Advisory Division, the
Commission, in its investigation of eases, makes full use of the facilities offered by
other departments of the Government to which it refers matters for scientific opinions
and information. The Commission receives effective cooperation from such agencies
as the United States Public Health Service, the National Bureau of Standards, the Food
and Drug Administration, and the Department of Agriculture’s bureaus relating to
agricultural chemistry, entomology, plant industry, animal industry, dairy industry, and
home economics, as well as from nongovernment hospitals, clinics, and laboratories
and from members of the medical profession and other scientists. The opinions and
data furnished by such agencies and individuals are often particularly helpful in
enabling the Commission to reach sound and fair conclusions with respect to scientific
and technical questions coming before it.
The Division of Accounts, Statistics and Economic Investigations conducts those
general inquiries of the Commission which are primarily of an economic nature, such
as industry inquiries, the industrial corporation reports project, and the current studies
of wartime costs, prices, and profits. (For details of wartime studies, see p.11.) This
division cooperates with the legal divisions with respect to antitrust cases and to cost
accounting work for the Robinson-Patman Act cases.
The Commission has on its staff an economic adviser who performs advisory service
in connection with economic problems involved in investigations and other work of
the Commission.
The Administrative Divisions conduct the business affairs of the Commission and
function under the executive direction of the Secretary. These divisions are: Budget
and Finance, Personnel Supervision and Management, Research and Library, Records,
and
Publication and Procurement.
PUBLICATIONS OF THE COMMISSION
Publications of the Commission, reflecting the character and scope of its work, vary
in content and treatment from year to year. Important among such documents are those
presenting fact-finding

8

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

studies, reports, and recommendations relating to general business and industrial
inquiries. Illustrated by appropriate charts and tables, these books and pamphlets deal
with current developments, possible abuses, and trends in an industry, and contain
scientific and historical background of the subjects discussed. They have supplied the
Congress, the Executive agencies of the Government, and the public with information
not only of specific and general value but of especial value as respects the need or
wisdom of new and important legislation, to which they have frequently led, as well
as to corrective action by the Department of Justice and private interests affected. The
Supreme Court has at times had recourse to them, and many of them have been
designated for reading in connection with university and college courses in business
administration, economics, and law.
The 33 published volumes of Federal Trade Commission Decisions contain the
findings of fact and orders to cease and desist issued by the Commission throughout
the years and constitute a permanent and authoritative record of the remedial measures
taken by the Commission to stop violations of the laws it administers. The decisions
set forth in these volumes establish for industry, business, and the individual the guideposts of fair competitive dealing. They also tell, case by case, the story of the
multiplicity of unlawful practices which have been found to be detrimental to the
public interest and of the accomplishments of the Commission in the prevention of
such practices.
The Commission publishes a monthly summary of work which reports current
progress in its various activities.
Regarding publications, the Federal Trade Commission Act, section 6 (f), says the
Commission shall have power-to make public from time to time such portions of the information obtained by it hereunder,
except trade secrets and names of customers, as it shall deem expedient in the public interest;
and to make annual and special reports to the Congress and to submit therewith
recommendations for additional legislation; and to provide for the publication of its reports and
decisions in such form and manner as may be best adapted for public information and use.

Publications of the Commission for the fiscal year ended June 30, 1942, were:
Federal Trade Commission Decisions, Volume 32, December 1, 1940, to May
31,1941.
Federal Trade Commission Decisions, Volume 33, June 1, 1941, to October 31,
1941.
Federal Trade Commission Rules, Policy and Acts, December 10, 1941.
Annual Report Of the Federal Trade Commission for the Fiscal Year Ended June
30,1941. House Document No.510, Seventy-seventh Congress, Second Session,
January 9, 1942.

RECOMMENDATIONS

9

Trade Practice Rules for the following industries: Beauty and Barber Equipment and
Supplies Industry, August 9, 1941; Luggage and Related Products Industry, September
17, 1941; Rayon and Silk Dyeing, Printing and Finishing Industry, December 12,
1941; Sun Glass Industry, December 23, 1941; Ribbon Industry, June 30, 1942.
RECOMMENDATIONS
Since 1930 the Federal Trade Commission has consistently recommended in its
annual and special reports to Congress the amendment of section 7 of the Clayton Act.
The substance of such recommendations was that acquisition of assets be declared
unlawful under the same conditions which are already applied to, the acquisition of
stock. In its last preceding annual report the Commission called attention to the
endorsement of such recommendations by the Temporary National Economic
Committee in its final report and to the Committee’s suggestion to Congress that the
acquisition of assets of competing corporations over a certain size be forbidden
without prior Governmental approval to insure that the purpose and probable result of
such acquisition would be in the public interest. The Commission is in accord with this
view and the principle of the Temporary National Economic Committee of thus
limiting future expansion of the evil.

PART I. WARTIME INVESTIGATIONS
A substantial part of the activities of the Federal Trade Commission during the fiscal
year was devoted to conducting wartime investigations and studies at the request of
various war agencies of the Government, including the War Production Board and the
Office of Price Administration.
For the performance of these duties, the Commission had available, when the call
came from the war agencies, the trained personnel of its legal examining, investigative,
accounting, statistical, and other services, all equipped by long experience to undertake
investigations and studies made necessary by the national emergency.
Of the 17 investigations or studies instituted, completed, or in progress during the
year, 16 related to projects which directly furthered the war effort, 13 being requested
by the war agencies and 3 being undertaken by the Commission on its own initiative
under authority of the Federal Trade Commission Act. One investigation, authorized
by the Commission during the last preceding fiscal year, had no direct connection with
the war program.
PRIORITIES INVESTIGATIONS
REPORTS MADE TO WAR PRODUCTION BOARD ON COMPLIANCE WITH
PRIORITY ORDERS BY SIX INDUSTRIES

One of the most valuable contributions the Commission made to the war effort
during the fiscal year was the series of priorities investigations it conducted for the
War Production Board.1 As it became increasingly necessary for the Government to
divert from civilian uses certain materials essential to the successful prosecution of the
war, the War Production Board undertook to ascertain whether industries producing
such materials were complying with its rules and regulations governing priorities.
Pursuant to authority vested in it by Executive orders issued in January 1942, the
War Production Board designated the Federal Trade Commission as an agency to
conduct investigations of certain basic industries to determine the extent and degree
to which they were complying with the board’s orders relative to the allocation of the
supply and the priorities of delivery of materials.
1 Two of these investigations, relating to the steel and the copper fabricating Industries. were requested
by the Office of Production Management, predecessor to the War Production Board.

492824---43-----2

11

12

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Six such inquiries, nation-wide in scope and comprehensive as to each particular
industry, were completed by the Commission during the fiscal year, involving field
investigations of a total of 1,110 companies. The industries investigated and the
number of companies covered in each were:
Steel, 31 companies; copper fabricating, 88; copper ingots, 83; jewel bearings, 172;
silverware, 19, and chromium and nickel, 717.
At the close of the fiscal year, the Commission was preparing to undertake for the
War Production Board another priorities investigation, this one covering 947
aluminum foundries.
The report on each of these investigations was made directly to the War Production
Board.
METAL-WORKING MACHINES SURVEY
DATA ON OPERATIONS OF 406 MANUFACTURERS COMPILED FOR USE OF
WAR PRODUCTION BOARD

For the purpose of furnishing the War Production Board with a complete and
detailed picture of the metal-working machines industry in the United States for a
representative period, the Commission made a survey of the operations of 406
manufacturers of such machines. The survey was begun at the request of the War
Production Board in May 1942, and at the close of the fiscal year basic data had been
collected and submitted to the board and the tabulation of the final summary Was
nearing completion.
Data gathered by the Commission included identification of metalworking machines
as to kind, type, size, and model; date of invoicing; customer’s name and Government
war contract number; customer’s order number, preference rating, and urgency
number; date the machine was required; and a detailed breakdown with regard to the
source of the customer’s contract. This last-mentioned item was designed to show the
number of machines shipped for the use of the various branches of the armed services
of the United States, for our Allies, and for other foreign and domestic uses.
INDUSTRIAL CORPORATION REPORTS
VALUABLE DATA FOR USE OF INDUSTRY IN WARTIME IS DEVELOPED

The industrial corporation reports project was initiated in accordance with the
functions of the Commission as set forth in section 6 of its organic act. On May 27,
1940, the Commission directed certain corporations to file financial reports for the
year 1939 and annually thereafter. The significant facts developed were published in
combined form.

INDUSTRIAL CORPORATION REPORTS

13

For many years the Commission has believed such a project would be of great
benefit to the national economy in peacetime and of especial value in a national
emergency. The plan was developed in cooperation with the Division of Statistical
Standards, Bureau of the Budget, Executive Office of the President, and other Federal
agencies. The Commission believes this type of fact-finding should be continuous so
that essential information may be always available. Much time and expense could have
been saved in the prewar emergency had such data been available covering a period
of at least five years.
Prior to the war period, the purpose of collecting and publishing these data obtained
from industry and trade was to aid in promoting orderly business operations and more
stable employment of labor. To a considerable degree, this purpose still controls.
Under war pressure, much of industry necessarily is forced into new channels, and
both labor and capital, except during periods of conversion, are more fully employed
than before. Under such conditions, the reports from industry and trade, when critically
analyzed and properly compiled, provide the Government with basic information for
use in formulating its over-all policy of industrial control and in guiding the nation’s
industrial activities to the end that essential military and civilian needs may be
supplied. The information thus compiled in industry reports may also serve the
purpose, when compared with earlier reports, of showing the effects of the war effort
on industry and trade and should aid in planning for post-war reconstruction.
The Commission believes the industry summaries will be of increasing value to the
Government in showing the trends of industrial activity, as well as to managers of
corporations, stockholders, lenders of capital, and the general public.
The industrial corporation reports project has been fully coordinated with wartime
work. The list of corporations earlier developed was supplemented to meet the
minimum needs of the Office of Price Administration with regard to 1940 operations.
The original 1940 project was expanded to cover 4,500 corporations representing the
consolidated operations of more than 7,000 corporations, of which 270 are Canadian.
The Commission also enlarged the project to collect and audit special annual reports
of earlier years and quarterly reports of subsequent operations, approximately 12,000
in all, for the Office of Price Administration.
Considerable demand for the completed reports on industrial operations of these
corporations has come from Government agencies most concerned with the war effort.
The reports for 1940 have been furnished to the Office of Price Administration, War
Production Board, the War and Navy Departments and other Government establishments. They have not been released to the public because of wartime restrictions as to
printing and publishing.

14

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

During the fiscal year, reports from 86 industry groups were received, and the
Commission is preparing composite summary reports showing, among other things,
the average rate of return for each of the industry groups, the range of returns for
individual corporations, and the average rates of the corporations grouped according
to the amount of assets.
The summary reports also give the total sales, the proportion sold in the domestic
and markets, the proportion of each dollar of sales represented by the cost of materials,
production labor cost, other pay roll in cost of goods (except in repairs and
maintenance and research and development), depreciation, obsolescence, etc.,
corporate taxes, social security and pension fund payments, repairs and maintenance,
research and development expense, selling expense, advertising, administrative and
general office expenses, and miscellaneous costs, together with the gross and net
margins on sales.
INDUSTRY GROUPS FOR WHICH 1940 OPERATIONS ARE REPORTED

The 86 industry groups for which reports of 1940 operations were obtained, listed
according to commodities, are :
Agricultural machinery and tractors.
Aircraft.
Asbestos and abrasive products.
Automobile parts and accessories.
Beet sugar.
Biscuits and crackers.
Blowers, exhaust, and ventilating fans.
Bolts, nuts, washers and rivets.
Bread and bakery products.
Cane sugar.
Cement.
Cereal preparations.
Chemicals (industrial).
Cigarette and tobacco products.
Clay products (other than pottery).
Coke-oven products.
Commercial laundry, dry-cleaning and
pressing machines.
Copper.
Corn products.
Cotton textiles.
Cranes : dredging, excavating and roadbuilding machinery.
Distilled liquors.
Drugs and medicines.
Electrical machinery and apparatus.
Elevators, escalators, and conveyors.
Fertilizer.
Firearms and ammunition.

Food products machinery.
Footwear (except rubber).
Forging-iron and steel.
Fruit and vegetable.
Furniture.
Glass and glassware.
Gray iron and malleable iron castings.
Gypsum products.
Heating and cooking apparatus (except
electrical).
Hardware.
Internal combustion engines.
Lead and zinc.
Leather.
Linoleum, and other hard surface floor
covering.
Lumber and timber products.
Machine shop products-water softeners.
Machine-tool accessories and machinists’ precision tools.
Machine tools.
Malt beverages.
Matches.
Mechanical measuring instruments (except electrical).
Mechanical stokers.
Mens, youths’ and boys’ clothing.
Merchant pig iron.

Flour.

Milk and milk products.

WARTIME COSTS, PRICES, AND PROFITS
Mining machinery and equipment.
Motor vehicles.
Non-ferrous metals (secondary).
Office and store machines.
Oil-field machinery.
Paints and varnishes.
Paper and pulp.
Paving and roofing materials.
Petroleum (refining).
Petroleum (crude producing).
Plastics.
Plumbers’ supplies.
Power boilers.
Pump and pumping equipment.
Railroad equipment.
Rayon and allied products.
Refrigeration equipment and air-conditioning units.
Rubber products.

15

Screw-machine products and wood
screws.
Sewing machines.
Shipbuilding.
Smelting and refining equipment.
Soap, cottonseed products, and cooking
fats.
Special industry machinery.
Steam engines and turbines.
Steel castings.
Textile dyeing and finishing.
Textile machinery.
Tin cans and tinware.
Wall board and plaster (except gypsum), building insulation, and floor
composition.
Wire and Cable (electrical).
Wool carpets and rugs.
Woolens and worsteds.

WARTIME COSTS, PRICES, AND PROFITS
INQUIRIES FOR OFFICE OF PRICE ADMINISTRATION RELATE TO
FURNITURE,
BREAD, PAPERBOARD, STEEL, AND FERTILIZER

Household furniture.--Early in the fiscal year the Commission, at the request of the
Office of Price Administration, made a Study of costs, prices, and profits of 67
representative furniture companies, to determine whether, and to what extent, increases
in the prices of household furniture were justified. Reports on the results of the
inquiry, submitted to the Office of Price Administration in September 1941, included
for each of the companies, for the years 1936-41, comparative rates of return on the
average annual total investment and on average annual Stockholders’ investment,
before and after income taxes; comparative capital turnover, correlated to rates of
return on average annual total investment; ratios of costs, expenses and net profits
from manufacturing per dollar of net sales; and comparison of net sales with the value
of furniture manufactured in 1939 as reported by the United States Bureau of the
Census. The reports also contained information with reference to costs of important
materials used in manufacturing household furniture; manufacturers’ factory prices of
specific articles; unit costs of the manufacture and sale of certain popular-selling items
as of the dates of price changes during the year preceding July 1941; and trends in
units costs and selling prices during that period.
This inquiry was conducted for the further purpose of determining whether
agreements to fix or maintain prices existed in the industry and whether increases in
wholesale prices of furniture were the result of collusion or other understandings in

restraint of trade.

16

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Bread-baking industry.--In the autumn of 1941, the Office of Price Administration,
believing the price of bread should be held at a minimum in the interest of the lowincome consumer, requested the Commission to make a study of the bread-baking
industry and to inquire particularly into consignment selling of bread by bakers to
retailers and the possibility of eliminating the practice.
Other general purposes of the inquiry were to ascertain whether the cost of
producing and marketing bread and the price paid by consumers could be reduced by
a modification or elimination of practices such as the acceptance by bakers of the
return of stale bread remaining unsold on retailers’ shelves; the delivery of fresh bread
daily or oftener to retail outlets; the sale of bread of the same kind in loaves of many
different sizes and weights; the sale of bread of the same kind but of more than one
grade or quality, taking into consideration particularly the marketing of so-called
“secondary” bread; the use of premiums, combination offers, free goods, and prizes;
and the furnishing of facilities by bakers to retailers.
Results of this inquiry, transmitted to the Office of Price Administration in January
1942, covered the industry’s size, growth, degree of concentration, regulations during
the first World War, production cost accounting, and uneconomic distribution
practices; costs, prices, profits, sales, and stale returns, etc., for 60 bread-baking
companies and summaries of their financial condition and operating results during the
years 1936-41; total cost of baking and wrapping white household bread, showing in
detail the costs of the principal ingredients and of direct labor, indirect labor,
production overhead, and wrapping materials and production and distribution
statistics.
Subsequent to the close of the fiscal year, at the request of the Director of the Office
of Economic Stabilization, the Commission undertook a further study of the bread and
flour industry.
Paperboard industry.-In a letter of November 12, 1941, to the Chairman of the
Federal Trade Commission, the Price Administrator wrote :
The Office of Price Administration, in performing its function of price stabilization; finds it
imperative to secure additional manufacturing cost. and profit data covering at least from 15 to
30 paperboard industrial units in wide geographic distribution * * *

The Administrator also stated it would be necessary to make this study particularly
in relation to the marginal or high cost mills because of the necessity of obtaining
“maximum production during the national emergency,” and later asked that the scope
of the inquiry be broadened to include 68 selected mills operated by 47 companies.
From records of the companies, the Commission obtained pertinent financial, cost,
and other statistical information regarding operations of the selected mills. These data
were presented to the Office of

WAR MATERIAL CONTRACTS, COSTS, AND PRODUCTION

17

Price Administration in May 1942, the report embodying summaries of financial
condition and operating results of the 47 companies for the years 1936-41; monthly
mill operating statements and costs for specified grades of paperboard for the 68 mills
statistics with respect to average hourly wage rates and earnings; quoted or list prices
of paperboard; cost per ton of various kinds of pulp, paper, and other materials; data
on sales of paperboard by grades; determination of machine hour rates; and a
description of the development of the paper and paperboard industries and their
methods of production cost accounting.
Steel costs.--Upon request of the Office of Price Administration, the Commission in
April 1942 undertook a study of costs, prices, and profits covering 30 steel producing
companies, including all the larger ones, the inquiry embracing costs for about 90
percent of the total steel production in the country. At the close of the fiscal year,
analysis was being made of the cost of production and distribution for each class and
grade of semifinished and finished steel products, such as ingots, blooms, slabs, billets,
plates, sheets, bars, rods, structural shapes, pipe, wire, and wire rope; and for the
particular sizes which account for a substantial portion of the tonnage in each of the
classifications.
Such costs are segregated so as to show separately the cost per ton for material used,
productive labor, fuel and power, depreciation, repairs and maintenance, property
taxes and insurance, other direct expenses, total material and conversion cost, shipping
expense, and general selling and administrative expenses. The total cost of production
and distribution is then compared with the corresponding net sales realization, after
allowance for discounts and outbound freight, so as to show the net operating profit
on each class and selected item. Supplemental information is also furnished with
respect to the tonnage and yields involved in each process.
Fertilizer and chemical industry.-Near the close of the fiscal year, the Office of Price
Administration made plans for the Federal Trade Commission to study costs, prices,
and profits in the fertilizer and related products industries. The inquiry, begun with a
study of 11 important companies in the phosphate rock mining industry, will include
also a large number of companies engaged in the production of superphosphate,
Organic nitrates, sulphuric acid, and mixed fertilizers.
WAR MATERIAL CONTRACTS, COSTS, AND PRODUCTION
COMMISSION AIDS HOUSE NAVAL AFFAIRS COMMITTEE IN STUDY OF
WAR
PROGRAM

The Federal Trade Commission, at the request of the House of Representatives
Committee on Naval Affairs, assigned members of

18

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

its accounting and legal examining staffs to assist the committee in its inquiry into
progress of the national defense program.
The Naval Affairs Investigating Committee assigned a number of the Commission’s
examiners to some of the more important field investigations involving a thorough
check of the awarding of contracts, and of cost records of aircraft manufacturers and
their operations and management; construction of naval air stations, beginning with
the selection of the sites and proceeding through all phases of construction to
completion; the organizational set-up of the contractors with reference to methods of
purchase and keeping of cost records; and an examination into the speed, progress, and
quality of the work in all phases.
Studies also were made of methods of control of materials purchased for use on
Government contracts, distribution of labor costs, including overtime and bonus
payments, distribution of overhead, patent licenses, and cartel agreements, all in
connection with the manufacture of scientific instruments and other products for the
Navy.
In thus assisting the House Naval Affairs Investigating Committee, the Commission
has had a substantial part in effecting Savings estimated by the committee as being in
excess of $500,000,000.
PRODUCTION COST ACCOUNTING METHODS
INQUIRY CONDUCTED AS INTEGRAL FACT OF THE WAR COST STUDIES

When the United States entered upon an active national defense program in 1940,
it became apparent that a study of methods, practices, and systems of production cost
accounting used in manufacturing industries, particularly those important to that
program, would be advisable. When the Bureau of the Budget authorized the Commission to initiate such an inquiry during the fiscal year, the Commission was then
preparing to investigate, at the request of the Office of Price Administration, costs,
prices, and profits of household furniture, and there was the prospect that it would be
occupied in other national defense inquiries. Consequently, the production cost
accounting study was conducted as an integral part of Such national defense and
wartime inquiries.
The information obtained will comprise a report on methods of production cost
accounting with chapters devoted to basic problems and principles, features of the socalled “standard costs system,” an illustrative description of an actual “manufacturing
order” or “job lot” cost system, and production cost accounting in the bread-baking,
paperboard, and steel industries.
In the baking industry, in which there is no product-in-process at the end of the
workday and only a negligible quantity of unsold

DISTRIBUTION METHODS AND COSTS

19

finished products on hand, there is no production cost accounting system that shows
either the total or the unit costs of the respective types of bread or of other bakery
products. The production of yeast raised products and of cakes and other pastries is
carried on by separately organized departments. Generally, monthly departmental
operating statements contain data. which permit computation of an average cost per
pound of all products of the department, but not of any specific description of product.
In the manufacture of paperboard, the machine that converts the raw materials into
finished paperboard represents an investment of such magnitude that often there will
be only one such machine in a mill. The prevailing method of applying operating or
“conversion” costs to the several kinds of paperboard made is to determine for the
machine the average operating cost per running hour, record the amount of actual
running time the machine consumes in producing each kind of paperboard, and
multiply this time by the hour-cost rate. The total “conversion” cost of the period,
which is divided by the number of running hours of the machine to yield the average
hour-cost rate, includes the direct labor cost, the direct supervision cost, the driving
power cost, the cost of steam for heating the water in the heaters and for drying the
paperboard, and all other operating costs pertaining to the machine.
In the steel industry, the successive processes of converting iron ore into pig iron,
of refining pig iron into steel ingots, or rolling or hammering the ingots into blooms,
or billets , bars or slabs, and of converting these semifinished into finished steel
products, are carried on by separate production organizations in separate plants; and,
although the same steel company may carry on the whole sequence of processes, a
portion of the steel product of any process may be sold and only the remainder passed
to the mill that performs the next process. The cost accounting is conducted so as to
show the cost of each process and also the purported cost of the product as it emanates
from each process. While some steel companies count as a component of the cost of
each production process a provision for depreciation of the investment in the plant and
equipment with which the process is carried on, many other steel companies treat
depreciation as a general charge against the operations as a whole or as an
appropriation from profit.
DISTRIBUTION METHODS AND COSTS
SURVEY FOR PRICE ADMINISTRATOR COVERS 20 COMMODITY GROUPS

From time to time during the fiscal year, special reports embodying the results of the
study made by the Commission in 1941 of methods and costs of distributing particular
commodities were prepared at the request of the Office of Price Administration for the
confidential

20

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

use of its commodity sections. The 20 commodity groups covered were : biscuits and
crackers, canned fruits and vegetables, carpets and rugs, cement , coffee , electric
household appliances, farm machinery, flour, food wholesaling and retailing, lumber,
meats, men’s and boys’ outer wear, men’s and boys’ shirts and collars, packaged
cereals, paints and varnishes, petroleum products, rubber tires and tubes, sugar,
women’s hosiery, and women’s outer wear.
The inquiry, which developed the groundwork of information for these reports, was
undertaken by the Commission on its own initiative in 1940 under authority conferred
upon it by section 6 of the Federal Trade Commission Act, the resolution directing that
an investigation be made of the methods and costs, of distributing commodities in the
channels of commerce of the United States, and of such relevant practices, usages,
trade barriers, laws, charges, rates, and other factors as are an element of or affect such
methods or costs in any substantial degree.
Material dealing with the methods and channels of distribution used and the costs
of distribution functions undertaken by manufacturers was obtained largely from
special reports made by sample groups of representative manufacturers of some 20
commodities or classes of closely allied commodities. Information respecting the
expenses of wholesale and retail distribution of these commodities was procured from
income tax reports of representative groups of corporations engaged primarily in
wholesaling or retailing particular commodities or classes of commodities selected for
special study. The period covered for costs of distribution for most of the commodities
selected was the calendar year 1939 or the fiscal years of the companies most nearly
coinciding therewith. Other sources drawn upon included the industrial corporation
reports project of the Commission (see p. 12), information developed in cases coming
before the Commission and other Government agencies, and material from trade and
other publications.
In addition to the special reports made to the Office of Price Administration, a onevolume report embodying the results of the inquiry for publication as a report of the
Federal Trade Commission was in preparation at the close of the fiscal year.
MASS FOODS DISTRIBUTORS
EFFECTS OF DELIVERY TO CHAIN WAREHOUSE AND STORE DOOR ARE
COMPARED

The Commission, on April 29, 1941, under authority of section 6 of the Federal
Trade Commission Act, directed an investigation into the prices paid by large retail
grocers for certain perishable foods which are customarily delivered by the
manufacturer to the retailer’s store door but which in recent years, often at the request
of the distributor,

MASS FOODS DISTRIBUTORS

21

have been delivered to his warehouse. The Commission excluded from the inquiry
fresh meats, fruits, and vegetables.
Foods which the Commission has found in many marketing areas to be included
among those whose delivery is being shifted from store door to warehouse delivery,
where desired by both seller and buyer, are cheese, biscuits and crackers, certain
bakery products, soft drinks, potato chips, mayonnaise and other salad dressings,
coffee, and many other specialty food products.
The initial pressure for warehouse delivery has usually come from the large grocery
chain. Such distributor may be interested in the change for either of two reasons : (1)
the manufacturer may give a price concession on goods delivered to the warehouse of
the chain distributor which is larger than the additional cost incurred by him in getting
those goods from his warehouse to his individual stores (2) the distributor may believe
that he has better control over his merchandising policies if all the chain’s purchasing
is effected through one central office or through the central office of each warehousing
district rather than through each store manager.
The food manufacturer may resist the pressure for a change from store-door delivery
to warehouse delivery for either of two reasons : (1) he may not wish to make the price
concession for warehouse delivery to which the distributor may think he is entitled,
believing either that such concession is unnecessary to hold the business, or that it is
unjustified under the Robinson-Patman Act, or that it will make it difficult for him to
hold the business of those who do not receive the price concession; (2) he may believe
store-door delivery in his business to be essential to maintaining sales volume by
insuring a constant fresh supply of his product in each store and an effective counter
display.
The discount allowed by the food manufacturer for warehouse delivery appears to
be the issue about which there is most concern. The chain may refuse to take the
product if it cannot get warehouse delivery. The manufacturer may refuse to supply
the product if he cannot deliver at the store. Sometimes, however, he compromises by
giving or offering to give warehouse delivery without allowing the discount. That
warehouse delivery gives rise to a saving for the manufacturer in many instances, there
can be little question. Whether the discount, when allowed, is always made available
to all on proportionally equal terms and whether it is always justified by a saving at
least equal to it in amount, may be questioned.
Sometimes the warehouse delivery discount received by a chain is of considerable
consequence. Its competitors, in such case, whether or not strictly entitled to the
discount under the sales terms, usually will feel that there is an unjustifiable
discrimination.

22

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

This inquiry, which was not directly related to the war effort , was nearing
completion at the close of the fiscal year.
OTHER WARTIME ACTIVITIES
Advertising analyzed for war agencies.--After the United States entered the war,
some of the war agencies made prompt use of the system long established by the
Commission for conducting comprehensive surveys of radio and periodical advertising
on a continuing basis.
At the request of various war agencies, the Commission during the fiscal year
surveyed, analyzed, summarized, and reported to the agencies such advertising in
newspapers, magazines, and radio broadcasts as contained any reference to the war,
the war effort, war economy or war production, the armed services, the general public
health or morale, price. rises or trends, rationing, priorities, conservation of paper,
rubber, or other materials, and other war-related subjects. Any advertisements found
to contain possible violations of the Code of Wartime Practices for American
Broadcasters and the Code of Wartime Practices for the American Press, as
promulgated by the Office of Censorship, were transferred to that office for
appropriate action.
Monthly reports made to, and at the request of, the War Production Board, contained
analyses and tabulations relative to rubber-products advertising and rubber selling
prices to facilitate the board’s survey of critical materials. In connection with this
project, a study was made of approximately 4,000 advertisements appearing in 71
issues of newspapers published in 64 cities located in 38 states.
For the Office of Price Administration, the Commission included in its regular
continuing survey of advertising those advertisements advising the public to “buy
now” or containing statements that materials are or will be scarce, that the quality of
new materials or products offered for sale is equivalent to or better than merchandise
formerly offered, statements concerning rationing, offers to sell products subject to a
“freeze order,” and any institutional or general character references to rationing, price
control, or quality which might affect the price and rationing program.
The material thus surveyed for the war agencies comprised all advertising broadcast
over the national and regional networks and samplings of that broadcast over all
individual stations; as well as advertisements in 583 magazines, 463 newspapers, 25
domestic newspapers printed in European languages, and 19 domestic newspapers
printed in Oriental languages.
Trade practice work in wartime.--In the establishment of rules and regulations under
its trade practice conference procedure (see p.67) ,

OTHER WARTIME ACTIVITIES

23

the Commission during the fiscal year adopted and followed the policy of directing
such activities to the furtherance of the war effort.
This policy also governed the administration of existing trade practice rules for many
industries. In addition, several important new projects were undertaken, one being for
the establishment of trade practice rules concerning the designation of colorfastness
of all types of textiles 2 in order that the consumer might be provided with essential
information relative to the different degrees of resistance to fading which the
respective dyestuffs employed will afford, including the relative colorfastness of the
dye to sunlight, washing, dry cleaning, perspiration , etc. These are matters of large
moment to the entire population in the present emergency, especially in view of the
enlarged need for obtaining the maximum service from consumer goods and the
necessity for manufacturers to use various substitute dyestuffs in order to conserve
critical materials.
Another trade practice proceeding concerned moth-protecting chemicals and devices
and the respective degrees of assurance which are thereby afforded to purchasers in
protecting woolen articles of clothing, blankets, household goods, and other products
subject to moth damage. This proceeding is designed not only to afford protection to
the purchasers of such articles but also to effect conservation of labor and materials
by providing more effective safeguards against the $200,000,000 moth-damage bill
which it is estimated is incurred annually.
Wool Act aids war program.--The Wool Products Labeling Act (see p.75) operated
effectively in support of the war effort, its provisions being indispensable to the
program for conserving wool as a critical war material and for its equitable distribution
for use to best advantage in essential military and civilian articles. The act provides a
bulwark of support for the economic well-being of the people at a time when the types,
character, and quality of merchandise must of necessity undergo many changes and
when wise buying and careful selection by consumers are more necessary than ever.
The act bars misrepresentation and deceptive concealment of content in the marketing
of wool products, which are essential in clothing and protecting the population.
Membership on war committees.--The Chairman of the Federal Trade Commission
served as a member of the Price Administration Committee of the Office of Price
Administration, and was the Commission’s representative in its continuing
relationships with the Board
2 Proposed trade practice rules concerning colorfastness of textiles were made public by the
commission, August 5, 1942, and hearings thereon were held in Washington, D. C., August
18.1942, and in New York City, September 9 and 10, 1942.

24

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

of Economic Warfare, established by the President, under the chairmanship of Vice
President Wallace, for “developing and coordinating policies, plans, and programs
designed to protect and strengthen the international economic relations of the United
States in the interest of national defense.” The Commission placed its staff of
accountants, economists, and statisticians at the disposal of the Board of Economic
Warfare to make studies and investigations required by the board.
In response to a request received from the Bureau of Industrial Conservation of the
Office of Production Management (now the War Production Board), the Chairman of
the Commission served as a member of that agency which is carrying on an intensive
“War Against Waste.” The Chairman also was a member of a committee for the
development and utilization of the country’s present and future petroleum resources
and facilities, of which committee the Petroleum Coordinator for National Defense is
Chairman.
Members of the Commission’s staff served on the following committees of the
Advisory Commission to the Council of National Defense: Inter-Departmental
Conference Committee on National Food Resources; Sub-Committee of InterDepartmental Conference Committee on Planning and Procedure; Fruit and Vegetables
Committee; Tobacco Committee; and Food Distribution Committee.
Through its Medical Advisory Division, the Commission cooperated with the
Medical and Health Supply Section of the Division of Civilian Supply, War
Production Board. The Director of the Medical Advisory Division performed liaison
duties for the Commission in connection with the work of the National Research
Council’s Committee on Drugs and Medical Supplies, which serves in an advisory
capacity to the War Production Board.

PART II. GENERAL LEGAL WORK
DESCRIPTION OF PROCEDURE
A case before the Federal Trade Commission may originate in any one of several
ways. The most common origin is through complaint by a consumer, a competitor, or
from public sources. The Commission itself may initiate an investigation to determine
whether the laws administered by it are being violated.1 No formality is required in
making application for complaint, a letter setting forth the facts in detail being
sufficient, but it should be accompanied by all evidence in possession of the
complaining party in support of the charges made.
INFORMAL PROCEDURE

Upon receipt of an application for complaint, the Commission considers the essential
jurisdictional elements before deciding whether it shall be docketed. When such
application has been docketed, it is assigned to an attorney for the purpose of
developing all the essential facts. The general procedure is to interview the party complained against, advise him of the charges, and request such information as he may
care to furnish in defense or in justification. It is the policy of the Commission not to
disclose the identity of the complainant. If necessary, competitors of the respondent
are interviewed to determine the effect of the practice from a competitive standpoint.
Often it is desirable to interview consumers and members of the general public to
obtain their assistance in determining whether the practice alleged constitutes an unfair
method of competition or unfair or deceptive act or practice, and also to establish the
existence of the requisite public interest.
After developing all the facts, the examining attorney summarizes the evidence in
a report, reviews the law applicable, and makes recommendations as to what action he
believes the Commission should take. The record is reviewed by the Chief Examiner
and, if found to be complete, is submitted, with a statement of facts together with his
conclusions and recommendations, to the Commission for its consideration.
If a published or broadcast advertisement coming under the observation of the Radio
and Periodical Division appears to be misleading, that division conducts mail inquiries
and reports its recommenda1

For a brief statement or the provisions of these laws, see p.1.

25

26

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

tion to the Commission under the procedure more fully explained on page 83.
The Chief Examiner or the Director of the Radio and Periodical Division may
recommend to the Commission: (1) that the case be closed without further action
because of lack of evidence or because the practice does not violate any law
administered by the Commission; (2) disposition of the application upon the signing
by the respondent of a stipulation as to the facts and an agreement to cease and desist
from the practices as set forth in the stipulation; or (3) issuance of formal complaint.
If the Commission decides that a formal complaint should issue, the case is referred
to the Chief Counsel for preparation of the complaint and trial of the case. Should the
Commission permit disposition by stipulation, the case is referred to the Chief Trial
Examiner or to the Director of the Radio and Periodical Division for negotiation and
submission to the Commission for approval.
All proceedings prior to issuance of a formal complaint or stipulation are
confidential.
FORMAL PROCEDURE

Only after careful consideration of the facts developed by the investigation does the
Commission issue a formal complaint. The complaint and the answer of the respondent
thereto and subsequent proceedings are a public record.
A formal complaint is issued in the name of the Commission acting in the public
interest. It names the respondent, or respondents, alleges a violation of law, and
contains a statement of the charges. The party complaining to the Commission is not
a party to the formal complaint; nor does the complaint seek to adjust matters between
parties; rather, the prime purpose of the proceeding is to prevent, for the protection of
the public, those unfair methods of competition and unfair or deceptive acts or
practices forbidden by the Federal Trade Commission Act and those practices within
the Commission’s jurisdiction which are prohibited by the Clayton Act (as amended
by the Robinson-Patman Act), the Export Trade Act, and the Wool Products Labeling
Act of 1939.
The rules of practice of the Commission (see p.107) provide that a respondent
desiring to contest the proceedings shall, within 20 days from service of the complaint,
file answer admitting or denying each allegation of the complaint.
Where evidence is to be taken, either in a contested case or where the respondent has
failed to file answer, the matter is set down for hearing before a member of the staff
of trial examiners, which hearing may be held anywhere in the United States, the
Commission being represented by one of its attorneys and the

DESCRIPTION OF PROCEDURE

27

respondent having the privilege of appearing in his own behalf or by attorney.
After the submission of evidence in support of the complaint, and then on behalf of
the respondent, the trial examiner prepares a report of the evidence for the information
of the Commission, a copy of which is furnished counsel for the Commission and
counsel for the respondent. Exceptions to the trial examiner’s report may be taken by
either counsel.
Briefs may be filed within a stated time after the trial examiner’s report is made, and
in the discretion of the Commission, upon the written application of the attorneys for
the Commission or for the respondent, oral argument may be had before the
Commission. Thereafter, the Commission reaches a decision either sustaining the
charges of the complaint or dismissing the complaint, or closing the case without
prejudice.
If the complaint is sustained, the Commission makes its findings as to the facts and
states its conclusion that the law has been violated, and thereupon an order is issued
requiring the respondent to cease and desist from such violation.
If the complaint is dismissed or the case closed, an appropriate order is entered;
sometimes such order of dismissal or closing is accompanied by a written opinion,
although more often reasons for the action appear only in the order.
Up to and including the issuance of an order to cease and desist, there is no
difference in procedure whether the case is under the Federal Trade Commission Act,
the Clayton Act, or the Wool Products Labeling Act, but the Clayton Act provides a
procedure for enforcement of cease and desist orders different from the other two acts.
Under the Federal Trade Commission Act and the Wool Products Labeling Act, an
order to cease and desist becomes final 60 days after date of service thereof upon the
respondent, unless within that period the respondent petitions an appropriate United
States circuit court of appeals to review the order. In case of review, the Commission’s
order becomes final after affirmance by the circuit court of appeals or by the Supreme
Court of the United States, if taken to that court. Violation of an order to cease and
desist after the same shall have become final and while it is in effect subjects the
offender to a civil penalty of not more than $5,000 for each violation, recoverable by
the United States.
Under the Clayton Act, an order to cease and desist does not become final, in the
sense that its violation subjects the violator to a penalty, until a United States circuit
court of appeals shall have issued its order commanding obedience, on the application

28

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

for review by the respondent or cross-application of the Commission for enforcement.
Under all three acts, the respondent may apply to a circuit court of appeals for
review of an order and the court has power to affirm, or to affirm after modification,
or to set aside, the order. Upon such application by the respondent and crossapplication by the Commission, or upon application by the Commission for enforcement of an order under the Clayton Act, the court has power to enforce the order to the
extent it is affirmed. In any event, either party may apply to the Supreme Court for
review, by certiorari, of the action of the circuit court of appeals.
PROVISIONS FOR PREVENTING DISSEMINATION OF FALSE
ADVERTISEMENTS

The Federal Trade Commission Act contains provisions for the prevention of the
dissemination of false advertisements concerning food, drugs, devices (meaning
devices for use in the diagnosis, prevention, or treatment of disease), and cosmetics.
In addition to the regular proceeding by way of complaint and order to cease and
desist, the Commission may, in a proper case, bring suit in a United States district
court to enjoin the dissemination of such false advertisements pending issuance and
final disposition of the complaint.
Further, the dissemination of such a false advertisement, where the use of the
commodity advertised may be injurious to health or where the advertisement is
published with intent to defraud or mislead, constitutes a misdemeanor, and conviction
subjects the offender to a fine of not more than $5,000, or imprisonment of not more
than 6 months, or both. Succeeding convictions may result in a fine of not more than
$10,000, or imprisonment of not more than 1 year, or both.
LEGAL INVESTIGATION
INQUIRIES PRIOR TO FORMAL COMPLAINT OR STIPULATION

The Commission makes legal investigation of all applications for complaint
preliminary to instituting formal action for the correction of unfair methods of
competition or other acts or practices violative of the laws it administers.
During the fiscal year ended June 30, 1942, the Commission disposed of 272
preliminary inquiries which had been docketed and 1,264 applications for complaint,
or a total of 1,536 informally docketed matters.
Investigation of cases in preliminary stages includes the general preliminary legal
investigating work of the Commission under the several acts and the continuing survey
of radio and periodical advertisements with the object of correcting false and
misleading representations.

LEGAL INVESTIGATION

29

Cases thus developed, unless closed without action, progress upon order of the
Commission to the status either of formal complaint or stipulation.
At the beginning of the fiscal year, July 1, 1941, there were pending for investigation
in the legal investigation division2 277 preliminary or undocketed cases. Three
hundred twenty-one additional applications of this character were received during the
year, making a total of 598 on hand, of which 313 were investigated. Of the
investigated matters, 228 were docketed and transmitted to the Commission for action
and 85 closed without docketing because of lack of jurisdiction or other reasons. This
left 285 preliminary cases of this type pending for investigation at the end of the fiscal
year.
Five hundred fifty-two applications for complaint, which had been docketed without
preliminary investigation, were pending for regular investigation at the beginning of
the year. Subsequently, 466 additional cases of this type were received, making a total
of 1,018 such cases docketed for investigation. Of these, 512 were investigated and
transmitted to the Commission for action, leaving 506 cases of this character pending
for investigation at the chose of the year.
During the year, 511 further investigations included inquiries into alleged violations
of cease and desist orders and stipulations, investigations for the Chief Counsel, and
others of a supplemental nature. At the end of the year, 223 such matters awaited
completion of investigation.
Thus, during the year, the legal investigation staff completed 1,336 investigations
under the laws administered by the Commission, and in addition, at the request of the
Office of Production Management and its successor, the War Production Board,
completed 7 nation-wide surveys covering the investigation of 1,516 companies
engaged in the manufacture of essential war products. (For details of these wartime
investigations, see p.11.)
PRICE FIXING AND OTHER TRADE RESTRAINTS

One of the fundamental purposes behind the passage of the Federal Trade
Commission Act in 1914 was the establishment of an agency which would detect and
eliminate illegal trade restraints in their incipiency, before they had developed into
monopolies. At the beginning of the fiscal year, 87 cases of this type were on the
Commission calendar, either awaiting investigation or being investigated. During the
year, 61 new cases were instituted, making a total of 148
2 Statistics hereinafter reported on pp. 29-32 concerning the general legal investigational work of the
Commission during the fiscal year are the records of the legal investigating division and not the
consolidated record of the Commission, and therefore do not coincide with the figures reported in the
tabular summary of legal work for the entire Commission appearing on pp.64-65.

30

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

restraint-of-trade matters on the calendar. In the same period, 67 investigations of this
type were completed for consideration and disposition by the Commission, leaving 81
pending on the active investigational calendar as of June 30, 1942.
Price fixing continues to be the most frequently recurring charge among the
restraint-of-trade cases, although the whole category of trade restraints will be found
among the charges in the cases pending before the Commission during the fiscal year
These include such practices as conspiracy to boycott or threats of boycott;
interference with sources of supply; threats of infringement suits not made in good
faith; sales below cost for the purpose of injuring competitors; collusive bidding;
intimidation of competitors; coercive practices; espionage; and commercial bribery.
The following general classifications of commodities involved are listed to convey
an idea of the widespread nature of the restraint-of-trade investigations: Agricultural
supplies; automotive equipment; beauty and barber supplies; clothing and coth;
construction materials and supplies; containers; dental equipment and appliances;
drugs, chemicals, and pharmaceuticals; electrical equipment and appliances; feathers;
firearms; flaxseed; food products and beverages; footwear and accessories; fuel; golf
clubs and equipment; hospital and surgical supplies; household wares, furnishings and
equipment; ice; insecticides; jewelry; lumber and lumber products; machinery and
tools; metal and metal products; minerals and mineral fibers; nursery stock; paint and
varnish; paper and paper products; photographic supplies; optical goods; publications;
rubber and rubber products; school equipment and supplies; silverware; technical
instruments and parts; textile fabrics; tobacco; vegetable fibers and oils; vending
machines; and vitrified products.
In addition to the original investigations undertaken during the year, 21 matters were
completed which involved formal docketed cases. These consisted of a variety of
matters, many requiring complete investigation to determine whether cease and desist
orders previously issued by the Commission were being violated. Investigations of this
nature are as extensive as those made in the original development of a case and in
some instances more difficult. At the close of the fiscal year 8 cases of this nature were
pending on the investigational calendar.
Of the 148 restraint-of-trade investigations which were active during the fiscal year,
24 resulted from applications for complaint filed by Federal, State, or municipal
agencies, and 25 were initiated by the Commission on its own motion. A few
applications for complaint. came from miscellaneous sources, but the majority
continued to originate among individuals and concerns whose business was being jeop-

LEGAL INVESTIGATION

31

ardized by alleged unfair and illegal practices. The group last mentioned was
responsible for 99 of these applications.
Investigations of alleged violations of section 7 of the Clayton Act may also be
classified as involving other forms of trade restraints. Under section 7, the Commission
had four preliminary matters for consideration during the fiscal year, three of which
were pending at the beginning of the year. These matters involved alleged unlawful
stock acquisitions by corporations engaged in the production and sale of steel and steel
products, in the factorage and refining of sugar, in the manufacture and sale of a
tanning product, and in the compressing and storage of cotton. Two of these matters
were disposed of by the Commission because investigation failed to indicate violation
of law. The other two remained on the suspense calendar at the close of the year for
further consideration.
CLAYTON ACT, SECTION 2, AS AMENDED BY THE ROBINSON-PATMAN ACT

The Robinson-Patman Act, approved June 19, 1936, amends section 2 of the Clayton
Act, and restates in more inclusive form the basic principle of prohibiting price
discriminations which injuriously affect competition. It also prohibits per se certain
classes of discriminations which may involve price only indirectly, without regard to
their competitive effects in specific cases, thus supplementing and strengthening the
previous legislation.
Matters involving possible violations of this act are generally quite complicated. An
effort is made by the Commission, in the preliminary stages of an investigation, to
determine not only whether the practice in question involves prima facie violation of
the act, but whether the defenses available under the act are present in the particular
matter. This frequently necessitates the checking of competitive prices and pricing
policies and of undertaking cost studies in cooperation with the parties charged with
violations.
Experience in the administration of the act has made it possible for the Commission,
through the development of certain information by preliminary inquiry, more readily
to clear up misunderstandings among the public as to the scope of the act and its
application to specific situations, as well as to make a more accurate selection for
investigation of matters involving probable merit. The Commission has endeavored,
in view of limited funds and personnel available, to confine investigations, insofar as
feasible, to matters of substantial importance, and to eliminate the expenditure of time
and money in the investigation of matters which preliminary inquiry discloses to be
of little practical importance. The necessary diversion of personnel for

32

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

work in connection with the war program has necessitated the further emphasis of this
effort.
During the year ended June 30, 1942, the Commission instituted field investigations
of alleged violations of the Robinson-Patman Act in 32 cases and completed
investigations in 79 cases. At the beginning of the year, 164 matters were on hand for
investigation, and at the close of the year, 117. As in previous years, the administration
of the statute has. touched widely varied fields of industry and commerce and involved
many classes of commodities. Frequently, an investigation of one member of an
industry requires similar investigations of other members of the same industry, in order
to accomplish equitable and effective correction. The proceedings of the Commission
and the decisions of the courts on these proceedings have served as useful guides for
members of industries in determining their pricing and distribution policies. It is
apparent that these guides have been beneficial both in effecting the voluntary
elimination of unlawful or doubtful practices before they become the subjects of
investigation, and in discouraging the inception of such practices.
FIELD INVESTIGATIONS OF CASES INVOLVING FOOD, DRUGS, DEVICES,
AND
COSMETICS

The Wheeler-Lea amendment to the Federal Trade Commission Act of March 21,
1938, greatly enlarged the preexisting need for medical and other scientific and expert
opinion and evidence. This was met in part by the establishment by the Commission
of a Medical Advisory Division. In the administration of the Wheeler-Lea amendment,
special attention has been given to therapeutic representations made concerning, and
pharmacological actions of, medicinal preparations, the use of which might be
injurious. Similarly, consideration has been given to devices also likely to be injurious
to health.
Since enactment of the Wheeler-Lea amendment, the Commission has completed
1,644 field investigations of alleged violations of section 12 of the Federal Trade
Commission Act, which relates to false advertising of food, drugs, devices, and
cosmetics. Of these, 232 were completed during the fiscal year. This number included
new cases as well as old cases reinvestigated to determine whether Commission cease
and desist orders, and stipulations executed by advertisers and accepted by the
Commission, were being violated, and whether additional practices not previously
prohibited were being carried on in contravention of the law.
At the close of the year, 181 applications for complaint respecting alleged false
advertising of food, drugs, devices, and cosmetics were under investigation, 9 of which
related to drug and cosmetic preparations and devices alleged to be injurious to health.

COMPLAINTS UNDER THE FEDERAL TRADE COMMISSION ACT

33

DISPOSITION OF CASES BY STIPULATION
PROCEDURE AFFORDS OPPORTUNITY FOR DISPOSING OF SOME CASES BY
AGREEMENT TO DISCONTINUE UNFAIR PRACTICES

Under certain Circumstances the Commission, instead of disposing of cases by
formal complaint and trial, affords the respondent the privilege of disposition by
signing a statement of fact and an agreement to discontinue the unfair practice.
The Commission’s policy with respect to the circumstances under which cases may
be disposed of by stipulation is set forth in the appendix, page 117.
A total of 560 stipulations in which various individuals, firms, and corporations
agreed to cease and desist from unlawful practices were approved by the Commission
during the fiscal year. These included 341 general cases and 219 cases pertaining
specially to radio and periodical advertising matter. (See p.82.)
COMPLAINTS
ALLEGED VIOLATIONS OF FEDERAL TRADE COMMISSION ACT AND
CLAYTON ACT AS AMENDED BY THE ROBINSON-PATMAN ACT

During the fiscal year ended June 30, 1942, the Commission issued 249 complaints,
of which 229 charged violation of the Federal Trade Commission Act and 20 charged
violation of the Clayton Act.
I. COMPLAINTS UNDER THE FEDERAL TRADE COMMISSION ACT
A. SUPPRESSION OF PRICE COMPETITION AND OTHER ALLIED
RESTRAINTS
OF TRADE
(Complaints referred to are identified by docket numbers. Full text of any complaint may be obtained upon
application to the Federal Trade Commission, Washington)

1. COMBINATIONS TO FIX AND MAINTAIN PRICES

Twenty-two complaints were issued charging combination and conspiracy in
restraint of trade among members of certain industries to fix minimum prices or
maximum discounts from a base price list at which their products were to be sold.
These complaints related to price-fixing combinations involving certain members of
the following industries:
Charcoal (4535); printed stationery (4538); bakery products (4550); milk and ice
cream cans (4551); electrical alloy wire (4558); paper products (4559); milk bottle
closures (4565); linen supplies (4588); women’s coats and suits (4596); women’s
millinery (4597); bottle and can crowns and caps (4602); crepe paper (4606); traffic

signals (4610); asbestos pipe coverings (4613); Harris Tweed fabric

34

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

(4618); liquid-tight paper containers (4675); art pictures (4693); uniforms (4612);
button molds (4726); commercial screen advertising (4736); women’s dresses (4751);
and garment boxes (4777).
2. AGREEMENTS IN RESTRAINT OF TRADE, BOYCOTT, AND REFUSAL TO
SELL

Three complaints were issued charging combination and conspiracy in restraint of
trade among members of certain industries, methods used being boycott, refusal to sell,
and interference with the sources of supply of competitors. The complaints related to
hardware wholesalers (4592); wholesale grocers (4643); and retail dealers in tea,
coffee, and household specialties (4776).
B. FALSE ADVERTISING AND MISREPRESENTATION

A total of 173 complaints issued by the Commission charged false and misleading
representations in advertisements, on labels, and otherwise. They may be classified
broadly as follows:
Sixty-two complaints alleged misrepresentation of origin, composition, performance,
condition, quality, ingredients, materials, price, quantity, or style of various products;
46 alleged false and misleading representations as to the therapeutic value of various
medicinal and food preparations and devices; and 12 alleged misrepresentation as to
business status, such as a retailer representing him-self to be a wholesaler or
manufacturer, or a commercial enterprise representing itself as a cooperative.
Nine complaints alleged misrepresentation as to results effected by the use of various
products; six, passing off of one article for another, or of used articles, or articles
composed in part of used materials, for new; seven, misrepresentation in the sale of
cosmetics, including in some instances failure to disclose harmful potentialities to
users; six, misrepresentation and disparagement of competitors’ products; six, false
and misleading use of well-known names to describe products of inferior quality; and
five, misrepresentation in the sale of correspondence courses of instruction.
Three complaints alleged misrepresentation of the durability or enduring qualities
of stone; three, misleading use of well-known corporate or trade names in promoting
the sale of products; two, false and misleading representation that the products
involved were made under the supervision of a doctor; two, misrepresentation of
qualities of radio devices; two, misrepresentation of durability and quality of fountain
pens; one, misrepresentation in connection with advertising for agents to sell
automobile devices; and one, misrepresentation of terms under Which coupons are
redeemed and misleading use of a well-known trade name.

COMPLAINTS UNDER THE CLAYTON ACT

35

C. MISCELLANEOUS COMPLAINTS

Twenty-seven complaints were issued in which the respective respondents were
charged with supplying dealers with lottery devices for use in the sale of merchandise;
commercial bribery; alleged misrepresentation in the sale of encyclopedias, Bibles and
prayer books, books and magazines, and books for keeping income tax in formation;
use of the Red Cross name and emblem in selling commercial products without
disclosing that the American Red Cross has no connection with the enterprise; and
misrepresentation in the sale of tinted or colored photographic enlargements and
miniatures, and frames therefor.
II. COMPLAINTS UNDER THE CLAYTON ACT
A. ALLEGED VIOLATION OF SECTION 2 (a) OF CLAYTON ACT AS AMENDED
BY
ROBINSON-PATMAN ACT

Eight complaints were issued charging violation of section 2 (a) through unlawful
discriminations in price among various purchasers in the sale of commodities of like
grade and quality. The complaints alleged that the effect of the discriminations may
be substantially to lessen competition or tend to create a monopoly in some line of
commerce, or to injure, destroy, or prevent competition either with those who
discriminate or knowingly receive the benefit of the discrimination, or with customers
of either of them. Three of the complaints involved candy and confections (4571,4673,
and 4677); two, corn syrup (4548 and 4556); one, hand-operated carpet sweepers
(4636); one, glass dairy-testing apparatus (4725); and one, tufted bedspreads, rugs and
allied products (4744).
B. ALLEGED VIOLATION OF SECTION 2 (c) OF CLAYTON ACT AS AMENDED
BY
ROBINSON-PATMAN ACT

Four complaints were issued charging violation of section 2 (c), the so-called
brokerage section. Two of the complaints related to the practice of buyers receiving
brokerage on their own purchases, one of these also involving the payment of such
brokerage by the manufacturer. Another charged the receipt of brokerage by an
intermediary under control of and acting for the buyer, and the fourth involved division
of brokerage with the buyer and an arrangement by the broker with the seller to make
corresponding allowance to the buyer in lieu of brokerage. Two of the complaints
related to transactions in fruits and vegetables (4547 and 4589); one relating to rice
was subsequently dismissed (4587).; and one involved crystal phosphate (4585).

36

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

C. ALLEGED VIOLATION OF SECTION 2 (d) OF CLAYTON ACT AS AMENDED
BY
ROBINSON-PATMAN ACT

Three complaints contained charges of violation of section 2 (d), which prohibits
discrimination in granting compensation to buyers who furnish services or facilities
where such compensation is not made available to other buyers on proportionally equal
terms. One of these complaints charged the allowance of special discounts on account
of services in pooling orders from the separate units of chain store buyers and
withholding such discounts from other competing buyers furnishing or offering to
furnish similar services (4571). Another involved compensating certain buyers for
advertising expenditures while withholding compensation for such purpose to
competing buyers (4637). The third alleged the allowance of compensation to certain
chain store customers for window displays while withholding such compensation from
independent store customers and not making it available on proportionally equal terms
to some chain store customers (4740).
D. ALLEGED VIOLATION OF SECTION 3 OF CLAYTON ACT

Five complaints charged the respondents with leasing and selling, or contracting to
sell, certain rivet-setting machines, or fixing a price therefor, or discount from, or
rebate on such price, on the condition, agreement, or understanding that the lessee or
vendee would not use the machines for setting any tubular or bifurcated rivets other
than those manufactured by or sold under the authority of the respective respondents.
(4560, 4561, 4562, 4563, and 4564.)
Another complaint alleged that a candy manufacturer sold or contracted to sell candy
bars to retail drug chain customers for resale, granting a discount on the dollar volume
of purchases, on the agreement that the purchaser would not deal in the candy of a
competitor. (4673.)
In another complaint a manufacturer of a hair tonic was charged with selling its
product on the condition, agreement, or understanding that the purchasers would not
use, sell, or distribute similar products of any of the competitors of the respondent and
that if such purchasers should use or distribute any product not purchased from the
respondent they would not be further supplied with or permitted to handle the
respondent’s product. (4773.)
It was alleged in each of these complaints that the effect of leasing or selling on the
condition or agreement set forth in each complaint may be to substantially lessen
competition in commerce.

ORDERS UNDER THE FEDERAL TRADE COMMISSION ACT

37

ORDERS TO CEASE AND DESIST
UNFAIR TRADE PRACTICES PROHIBITED IN 250 CASES

The Commission issued 250 orders to cease and desist from the use of unfair
methods of competition and other violations of law during the fiscal year ended June
30, 1942.
The following cases, briefly described, are illustrative of orders to cease and desist
issued during the fiscal year:
I. ORDERS UNDER THE FEDERAL TRADE COMMISSION ACT
COMBINATIONS TO FIX AND MAINTAIN PRICES AND RESTRAIN TRADE

Scientific Apparatus Makers of America, Chicago, and others.--An unincorporated
group of the members of this incorporated association, styled the Surveying-DraftingCoaters Section of Scientific Apparatus Makers of America and consisting of
producers and distributors of tracing cloths, blueprint papers, and other similar supplies and equipment, were ordered to cease and desist from carrying out a conspiracy
to fix and maintain prices for their products. The order prohibited them from
exchanging information among themselves, pursuant to agreement, regarding prices,
discounts, terms, and conditions of sale, from classifying customers, and particularly
from adopting any regulation designed to prevent any deviation on the part of the
members of the association from the prices, discounts, and terms fixed and agreed
upon. (3092.)
The Hardwood Institute, Oshkosh, Wis., and others.--An order was issued directing
21 hardwood lumber manufacturers in Wisconsin and The Hardwood Institute, an
unincorporated trade association, to cease and desist from entering into or carrying out
any agreement or combination for the purpose or with the effect of restricting price
competition in the sale of hardwood lumber.
Among the practices engaged in by the respondents, pursuant to agreement, and
which were prohibited by the order, were the following fixing or maintaining prices,
terms or conditions of sale; using a system for calculating and quoting prices
predicated upon a designated basing point plus freight therefrom; preparing or
circulating for use of sellers of hardwood lumber compilations of delivery charges to
produce the same delivered price quotations at any given destination; exchanging price
lists among themselves or with competing sellers or adhering or agreeing to adhere to
the prices quoted in such lists; exchanging detailed information concerning sales; and
formulating or adopting various practices for the purpose of producing uniformity in
such quotations. (3418.)

38

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Power and Gang Mower Manufacturers’ Association, Detroit, and others.--This
trade association and 6 manufacturers, who sold from 65 to 85 percent of the power
and gang mower industry’s products, were ordered to cease and desist from any
agreement or combination to maintain prices and uniform discounts, terms of sale, or
trade-in allowances, or otherwise to hinder competition. (3689.)
Western Confectioners Association, Inc., San Francisco, and others.--This
association, its officers, and 18 of its member manufacturers were ordered to cease and
desist from entering into or carrying out any agreement to establish or maintain
uniform or minimum prices for their candy products or uniform discounts to
purchasers. The order directed the respondents to discontinue any concerted action to
classify purchasers of their products for the purpose of fixing or maintaining uniform
discounts, and prohibited coercion of manufacturers by threats of legal action or
otherwise to maintain uniform or minimum prices fixed by the respondents. (4132.)
Salt Producers Association, Detroit, and others.--The order in this case directed the
association and 20 member corporations, and others, to cease and desist from
combining or conspiring to fix or maintain prices for, or to curtail and regulate the
production or sale of, salt. The order required the respondents to cease engaging in the
following practices, pursuant to agreement: establishing or maintaining uniform prices,
terms or conditions of sale; quoting and selling under a zone system whereby the
delivered cost to buyers within each respective zone was made identical; exchanging
price lists, invoices, and the names of distributors or dealers who receive special
discounts; and curtailing or regulating the quantity of salt to be produced and sold by
any respondent corporation. (4320.)
Organization Service Corporation, New York, and others.--This corporation, two of
its subsidiary institutes, and certain of its members engaged in the manufacture of pins,
metal paper clips, and fasteners were ordered to cease and desist from engaging in the
following practices by agreement or combination: fixing, establishing, or maintaining
prices to be charged for their products; compiling or exchanging statistical information
concerning prices to be charged; and employing or participating in any inquiry
pertaining to prices with the purpose or effect of causing adherence to or maintenance
of uniform prices (4351.)
AR. Winarick, Inc., New York, and others.--These respondents, engaged in the sale
of beauty parlor and barber supplies, were ordered to cease and desist from entering
into or continuing any agreement to restrain competition and fix prices. (4470.)
Pacific Fruit & Produce Co., Walla Walla, Wash., and others.--Five Walla Walla
shippers of broadleaf spinach, a Minneapolis fruit

ORDERS UNDER THE FEDERAL TRADE COMMISSION ACT

39

brokerage company, and four Chicago produce jobbers were ordered to cease and
desist from carrying out a conspiracy to eliminate competition or monopolize trade in
the Chicago area. The order prohibited the following practices, among others, when
engaged in pursuant to agreement: restricting the sale and purchase of broadleaf
spinach to selected shippers and jobbers; determining or limiting the number of
jobbers who shall purchase in any designated area; causing all purchases and sales to
be made through certain designated brokers; preventing jobbers and wholesalers not
parties to the agreement from purchasing from selected shippers from the Walla Walla
district; and fixing or maintaining the price to dealers or the public in Chicago. (4487.)
Newton Paper Co., Holyoke, Mass., and others.--A paper manufacturer, three New
York distributors of “bogus” paper (a cheap flexible paper cut by dies into stays used
in lining handbags and pocketbooks), a die cutters’ trade association, its executive
secretary, and seven operators of stay die cutting businesses, were ordered to cease and
desist from entering into understandings or conspiracies to hinder or restrain
competition. The respondents were further ordered to cease and desist from the
following practices when engaged in pursuant to agreement: fixing and establishing
prices, terms, and discounts; allocating new and prospective customers; refusing to sell
to customers of other members of the association; restricting purchases to the
respondent manufacturer and distributors; furnishing the association or its
representative with lists of delinquent customers and refusing to sell to such
customers; and assessing penalties for violation of the agreement. (4559.)
James MacDonald, Ltd., Stornoway, Scotland, and others.--Five Scottish
manufacturers of Harris Tweed fabrics and their sales representatives in the United
States were ordered to cease and desist from engaging in any price-fixing agreement
or conspiracy which restrains and monopolizes the sale of their products in the trade
between Great Britain and the United States and among the States of the United States.
The order prohibited the carrying out of any agreement which provides that
manufacturers will not sell Harris Tweed garments purchased from the respondents at
prices lower than those fixed by the respondents; that manufacturers will not sell to
any retailer who does not bind himself to sell at or not less than certain fixed prices;
that retailers will not sell at prices less than those fixed by respondents; and that the
respondents will compile and circulate among themselves a list of manufacturers who
cut the prices thus fixed. The order also prohibited the respondents from fixing and
maintaining, by concerted or collective action, minimum prices, terms, and conditions
of sale. (4618.)

40

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

COMBINATIONS IN RESTRAINT OF TRADE, BOYCOTT, REFUSAL TO
SELL
Chicago Medical Book Co., Chic ago, and others.--Chicago Medical Book Co.,
dealer in medical books, and four publishers of medical books located in Philadelphia
and St. Louis were ordered to cease and desist from entering into or carrying out any
agreement or conspiracy for the purpose or with the effect of restraining competition,
and particularly from engaging in the following practices as a part of such agreement
or conspiracy: attempting to boycott any dealer; refusing to sell to any such dealer;
preventing or attempting to prevent any dealer from purchasing at the regular price;
and discriminating against any dealer as to price or other conditions of sale. (3557.)
The Wholesale Dry Goods Institute, Inc., New York, and others.--The respondents,
including 115 individuals, copartners, and corporations engaged in the wholesale
distribution of dry goods, notions, and kindred merchandise, were ordered to cease and
desist from following a common course of action in connection with any mutual
understanding, agreement, or conspiracy for the purpose and with the effect of
establishing the respondents as a preferred class of buyers or of inducing, coercing, or
restraining manufacturers in the determination of their sales policies or the selection
of their customers. Other practices prohibited by the order included circulating a list
of preferred buyers recognized as wholesalers or a list of manufacturers; refusing or
threatening to refuse to deal with manufacturers because they sell to buyers not
recognized by the respondents as wholesalers; and threatening manufacturers for the
purpose or with the effect of preventing them from selling to certain prospective
buyers. (3751.)
Berland Supply Co., Inc., Milwaukee, and others.--A group of glassware
manufacturers and their representatives and an association of wholesale dealers were
ordered to cease and desist from conspiring to suppress competition in the glassware
trade in Milwaukee and the surrounding trade area. The order directed the respondents
to cease and desist from any agreement to refuse to sell to any person or to cut off his
source of supply or otherwise deprive him of an opportunity to compete; to prevent by
coercion any wholesaler or retailer from engaging in price competition; to designate
who shall be wholesalers; or to otherwise limit the number of persons who may
participate in the glassware trade. (3861.)
Milwaukee Jewish Kosher Delicatessen Association, Milwaukee, and others.--This
association and five proprietors of delicatessen stores in Milwaukee, members of the
association, and two Kosher meat manufacturers in Chicago were ordered to cease
conspiring to lessen competition in the sale of Kosher products. The order directed
them to cease and desist from agreeing to lessen competition by hindering certain
purchasers in Milwaukee from buying Kosher

ORDERS UNDER THE FEDERAL TRADE COMMISSION ACT

41

meats or allied products from manufacturers outside of Wisconsin and by obstructing
sellers outside of Wisconsin in selling to certain Milwaukee merchants. (3908.)
Retail Coal Merchants Association, Richmond, Va., and others.--The association and
its officers and members, consisting of all but three retail coal dealers in that city, and
four wholesalers were ordered to cease and desist from entering into or carrying out
any agreement for the purpose of restraining competition in the retail sale of coal in
the Richmond trade area. The order directed the association and its officers and
members to cease and desist from agreeing with wholesalers that the latter would not
ship to retail dealers in Richmond who were not members of the association or whose
prices were not those agreed upon by the association members; and urging
wholesalers, under threat of boycott, to cooperate with the respondent retailers by
refusing to sell to nonmembers of the association. The order also required the
respondent wholesale dealers to cease entering into agreements with the association
or its members for the purpose of restraining competition in the retail sale of coal in
the Richmond area and, specifically, to discontinue agreeing among themselves or with
other respondents that they would not ship to Richmond retailers who were not
members of the association. (3911.)
Detroit Candy & Tobacco Jobbers Association, Inc., Detroit, and. others.--The
respondent association, its officers, directors, and 30 regular and 125 associate
members, constituting a majority of the wholesalers and jobbers of candies, tobaccos,
and groceries in the Detroit area, were ordered to cease and desist from coercing,
inducing, or persuading sellers of these products, located in states other than Michigan,
to refrain from selling to competitors of members of the respondent association.
(4321.)
Inter-State Cigarette Merchandisers Association, Newark, N. J., and others.--The
association and five member associations of similar name in New Jersey, New York,
Pennsylvania, Connecticut, and Massachusetts, composed of persons or companies
operating automatic cigarette vending machines, and their officers, directors, and
members, were ordered to cease and desist from certain agreements in restraint of
competition in the sale of their products and from engaging in the following practices:
establishing members of the association as a preferred class for the purpose of
confining the sale of automatic cigarette vending machines to such m embers
exclusively; interfering with competitors in their effort to purchase and obtain such
machines; and restraining, by threats and coercion, manufacturers from selling to
competitors of members. (4388.)
Food Service Equipment Industry, Inc., Chicago, and others.--Food Service
Equipment Industry, Inc., an association composed of more than 100 dealers in food
service equipment for hotels, restaurants,

42

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

and clubs, and American Vitrified China Manufacturers Association, its officers and
member manufacturers, and a number of manufacturers of food service equipment,
were ordered to cease and desist from carrying out certain agreements and
combinations to restrict competition. Among the specific practices prohibited were
selecting or classifying jobbers or dealers as recipients of special benefits not granted
to other jobbers; urging members to give preference to those manufacturers who had
received the endorsement of the association because they had cooperated in carrying
out its policies and methods; and urging manufacturers of food service equipment to
sell exclusively to members of Food Service Equipment Industry, Inc. The order
required the manufacturers who had received the association endorsement to cease and
desist from refusing to sell to or through any jobber or dealer because he had not been
selected by the association, or from refusing to sell directly to hotels, restaurants, and
others at lower prices than such purchasers could receive from approved jobbers or
dealers. The order also was directed against certain practices engaged in by American
Vitrified China Manufacturers Association and its members. (4433.)
MISREPRESENTING COSMETICS AND SOAP TO BE CAPABLE OF
CORRECTING
VITAMIN DEFICIENCY

Jergens-Woodbury Sales Corporation, Cincinnati.-This respondent was ordered to
cease and desist from representing its face powders and creams to be germicidal while
in use or that its face cream and soap have any beneficial effect on the skin by reason
of their vitamin content. (3438.)
MISREPRESENTING A MEDICINAL PREPARATION AS AN EFFECTIVE
REMEDY
FOR THE COMMON COLD

Aspironal Co., Atlanta, Ga.--An order directed this respondent to cease and desist
from representing, among other things, that Aspironal is a cure or effective remedy for
the common cold, and from disseminating any advertisement which fails to reveal
certain potential dangers in its use. (4574.)
CONCEALING FOREIGN ORIGIN OF PRODUCT

Hollywood Racket Manufacturing Co., Inc., Hollywood, Calif.-The respondent
company, engaged in the sale and distribution of tennis, badminton and squash rackets
imported in an unfinished state from Japan, was found to have obliterated or concealed
the legend “Made in Japan” originally appearing on the rackets. The Commis-

ORDERS UNDER THE FEDERAL TRADE COMMISSION ACT

43

sion directed the respondent to cease and desist from using the name “Hollywood
Racket Mfg. Co.” as a mark or in advertising without disclosing the foreign origin of
its rackets. (3931.)
MISREPRESENTATION OF UPHOLSTERY FABRIC AS “MOTH-PROOF”

Sanford Mills, Sanford, Maine, and others.--Engaged in selling a mohair upholstery
fabric designated “Velmo”, these respondents were ordered to cease representing their
upholstery fabric as being mothproof. The Commission found that while the
respondents subject their fabrics to a process which they believed to be effective, and
that while they guaranteed to make good, and on occasion have made good, legitimate
claims for moth damage, their process does not render the fabric permanently immune
from all moth damage. (4084.)
MISREPRESENTING THE FIBER OF HAND KNITTING YARNS

Bell Yarn Co., New York.--The respondent was ordered to discontinue the use of the
words “Cashmere”, “tweed”, “Angora” or “Angoray”, “Shetland”, or “crepe” to
designate yarn not composed entirely of the fiber represented by such words. (4326.)
RETAIL FURNITURE DEALER REPRESENTED AS A WHOLESALER

Joseph Warner furniture Corporation, New York.--This retail furniture company,
representing itself to be, customarily, a wholesaler, circularized prospective customers
by mail and personal advertising, issuing “Admittance Permits” to its “Trade
Showrooms” where salesmen represented that the prices were wholesale when they
were in fact higher than wholesale prices and the various “discounts” allowed the
customer were discounts from excessively high prices marked on the furniture. (4416.)
MISREPRESENTATION OF CONNECTION WITH THE DISABLED AMERICAN
VETERANS OF THE WORLD WAR

Disabled American Veterans of the World War Rehabilitation Department, Chicago,
and others.--The respondents were prohibited, among other things, from using, in
connection with the sale of certain history books, the name of “Disabled American
Veterans of the World War,” and from representing that their salesmen were
representatives of the veterans’ organization, and that the organization received all the
profits derived from the sale of the books. The Commission found that the respondent
corporation had an arrangement with the veterans’ organization for the use of the name
on a royalty basis, but there was 110 other connection between the two. (4492.).
492824--43----4

44

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION
FALSE AND MISLEADING ADVERTISING OF AUTOMOBILE PRICES

Ford Motor Co., Dearborn, Mich.--The practice condemned in this case by an order
to cease and desist involved misrepresentation of the ultimate price of automobiles to
the consumer. In the course of a national advertising campaign, the Commission found,
the objection-able advertisements described and illustrated a fully equipped car and
quoted an “f. o. b.” price in bold figures, sometimes followed by the words “and up”
in much smaller and inconspicuous type, the purport of the advertisement being that
the car as illustrated, fully equipped and ready to operate, could be purchased for the
price featured plus transportation charges from the f. o. b. point. The Commission
found that the car illustrated was often a higher-priced car, and that to its price
additional charges were added for accessories usually considered “standard”
equipment, such as bumpers, bumper guards, spare tire, together with charges for such
items as taxes, advertising, “handling” and “conditioning.” The respondent was
ordered to cease and desist from representing as the price of a car any price other than
the actual retail price at the sales point designated, including therein all accessories
illustrated or necessary to the operation of the car or customarily included as standard
equipment, and including all other charges not specifically stated and clearly shown
to be additional charges. (3174.)
FALSE AND MISLEADING ADVERTISEMENTS OF MEDICINAL
PREPARATIONS

During the fiscal year there were issued some 50 orders to cease and desist from
false and misleading advertisements of medicinal preparations and corrective devices
and cosmetics. In many cases there existed potential dangers in their indiscriminate use
or in their use without the advice of a physician.
SALES METHODS INVOLVING LOTTERY SCHEMES AND SALE OF DEVICES
FOR CONDUCTING THEM

About the same number of orders to cease and desist was issued in cases involving
lottery schemes and other games of chance used to promote the sale of candy and other
merchandise to the public. Manufacturers and distributors were prohibited from selling
merchandise so arranged as to involve the use of a lottery scheme or game of chance
in sales of such merchandise to ultimate purchasers. In some cases, orders were issued
against the manufacturers and sellers of devices such as punch boards designed for use
in lottery schemes.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

45

II. ORDERS UNDER THE CLAYTON ACT
A. VIOLATION OF SECTION 2 (a) OF CLAYTON ACT AS AMENDED BY
ROBINSON PATMAN ACT

Under Section 2 (a), which prohibits discrimination in price when it may have
certain effects on competition, the Commission issued eight orders to cease and desist.
Corn Products Refining Co., New York, and others.--The order in this case
prohibited discrimination in delivered prices of glucose which made more than due
allowance for differences in cost of delivery, a form of discrimination arising from
calculating the delivery charges from a point other than the point of origin of the
shipment. The order also forbade discrimination in price resulting from permitting
favored customers to buy glucose after a general price increase at prices formerly in
effect. Price discrimination depending on differences in the type of glucose containers
used and direct price discrimination in the sale of gluten feed and meal and corn starch
to certain customers was also forbidden. The order included a prohibition, under
section 2 (e), against granting to some favored buyers advertising allowances that were
not accorded competing buyers on proportionally equal terms. (3633.) (For violation
of section 3 of the Clayton Act in this case, see Corn Products Refining Co., and
others, p.47.)
Clinton Co., Clinton, Iowa, and others, and A. E. Staley Manufacturing Co.,
Decatur, Ill., and others.--Orders in these cases likewise ran against discrimination in
the delivered prices of glucose which made more than due allowance for differences
in cost of delivery also arising from calculating delivery charges from a point other
than actual place of shipment. Again, these two companies were forbidden to
discriminate in price through favoritism in “booking” orders as in the Corn Products
case. In addition, the Clinton company order ran against discrimination resulting from
unwarranted price differentials on account of the type of container used. (3800 and
3803.)
C. F. Sauer Co., Richmond, Va.--This order forbade discriminations in price among
various competing purchasers of the respondent’s salad dressings, spices, drugs, and
insecticides. Under section 2 (d), the making of allowances for advertising to certain
customers which were not available to others on proportionally equal terms also was
forbidden. (3646.)
Life Savers Corporation, Port Chester, N. Y.--This manufacturer and distributor of
a candy confection was ordered to cease selling to some purchasers at a price different
from that made to other customers, the difference not being justified by only a due
allowance in the difference in cost of manufacture, sale, or delivery. The order

46

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

also contained a prohibition under section 2 (d) against discrimination among
customers in the matter of payments made to some multiple retail outlet distributors
for Services or facilities furnished by them while not making such payments available
to other customers on proportionally equal terms. (4571.)
National Grain Yeast Corporation, Belleville, N.J.; Federal Yeast Corporation,
Baltimore; and Republic Yeast Corporation, Newark, N. J.--Orders were issued
against these concerns forbidding discrimination in price among competing purchasers
of bakers’ yeast. The order against the first-named company also involved allowances
to bakers’ associations as commissions or brokerage which inured to the buyers in
violation of section 2 (c). (3903, 3926, and 4367.)
B. VIOLATION OF SECTION 2 (c) OF CLAYTON ACT As AMENDED BY
ROBINSON-PATMAN ACT

United Buyers Corporation, Chicago, and others; Giant Tiger Corporation,
Philadelphia; Uco Food Corporation, Newark, N.J.; R. C. Williams & Co., Inc., New
York; A. Krasne, Inc., New York; The Thomas Page Mill Co., Inc., Topeka, Kans.;
Reed-Harlin Grocer Co., West Plains, Mo., and others, and Miles Brokerage Co., Inc.,
Clearfield, Pa., and others.--The respondents in these eight cases, all en gaged in the
distribution of food products, were ordered to cease and desist from the practice of the
buyer receiving from the sellers, directly or indirectly, brokerage on the buyer’s
purchases. In the United Buyers Corporation case, about 50 wholesale grocer buyers
and 300 manufacturer-sellers were bound by the order. (3221, 4276, 4277, 4279,
4280, 4286, 4486, and 4519.) (See also National Grain Yeast Corporation, above.)
C. VIOLATIONS OF SECTION 2 (d) AND 2 (e) OF CLAYTON ACT AS AMENDED
BY
ROBINSON-PATMAN ACT

(For orders issued under section 2 (d), see C. F. Sauer Co. and Life Savers
Corporation, p. 45. For order issued under section 2 (e), see Corn Products Refining
Co., and others, p.45.)
D. VIOLATION OF SECTION 2 (f) OF CLAYTON ACT AS AMENDED BY
ROBINSON-PATMAN ACT

A. S. Aloe Co., St. Louis.--One of the largest retailers of surgical supplies and
equipment, the respondent was ordered to cease and desist from inducing or receiving
the benefit of numerous price discriminations granted by sellers, to the disadvantage
of dealers competing with it. (3820.)
E. VIOLATION OF SECTION 3 OF CLAYTON ACT

The Gerrard Co., Inc., and others; Signode Steel Strapping Co., and Acme Steel Co--

Orders were issued requiring each of these Chi-

ORDERS UNDER THE CLAYTON ACT

47

cago corporations to cease and desist from leasing, selling or making, or continuing
in effect, any contract for the sale of machines or appliances (wire and strap tying
machines) on the condition, agreement, or understanding that the lessee or purchaser
shall not use in or with such machines or appliances any wire other than that acquired
from the respondents or from sources designated by them. (3498, 3688, and 3818.)
General Motors Corporation and General Motors Sales Corporation, Detroit.--An
order was entered requiring General Motors Corporation and General Motors Sales
Corporation to cease and desist from entering into, enforcing, or continuing in
operation any franchise or agreement for the sale of automobiles, or any contract for
the sale of automobile parts, on the condition, agreement, or understanding that the
purchaser shall not use or sell automobile parts other than those acquired from the
respondents unless such condition, agreement, or understanding be limited to
automobile parts necessary to the mechanical operation of an automobile and which
are not avail-able, in like quality and design, from other sources of supply. Such
exclusive dealing agreements were found by the Commission to be in violation of
section 3 of the Clayton Act. The order also directed that the respondents, in
transactions with their dealers, discontinue certain unfair methods of competition
found to be in Violation of the Federal Trade Commission Act. (3152.)
Corn Products Refining Co. and Corn Products Sales Co., Inc., New York.--An order
was issued requiring these respondents to cease and desist from contracting to sell or
selling starch products to certain customers, or fixing a price therefor or discount or
rebate therefrom, on the condition, agreement, or understanding that any such
purchaser shall not use or deal in cornstarch or other starch products of the
respondents’ competitors, or from performing, enforcing, or continuing in operation
or effect any such condition, agreement, or understanding. (3633.) (For violations of
the Robinson-Patman Act in this case, see Corn Products Refining Co., and others,
p.45.)
R. T. Vanderbilt Co., Inc., and Standard Mineral Company, Inc., New York.--These
respondents were ordered to discontinue, among other things, licensing the use of
certain patents controlled by them or making any sale or contract or agreement under
such patents for the sale of pyrophyllite, a commodity used in the ceramic industry, on
the condition, agreement, or understanding that the licensee or purchaser thereof shall
not, in manufacturing semivitreous earthenware, use pyrophyllite purchased from or
supplied by competitors of the respondents. The order in this case also was directed
against what the Commission found to be unfair methods of competition and unfair
and deceptive acts and practices in violation of the Federal Trade Commission Act.
(3656.)

48

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

TYPES OF UNFAIR METHODS AND PRACTICES
TYPICAL METHODS AND PRACTICES CONDEMNED IN ORDERS TO CEASE
AND
DESIST

The following list illustrates unfair methods of competition and unfair or deceptive
acts and practices condemned by the Commission from time to time in its orders to
cease and desist. This list is not limited to orders issued during the fiscal year. It does
not include specific practices outlawed by the Clayton Act and committed to the
Commission’s jurisdiction, namely, various forms of price discrimination, exclusive
and tying dealing arrangements, competitive stock acquisition, and certain kinds of
competitive interlocking directorates.
1. The use of false or misleading advertising concerning, and the misbranding of,
commodities, respecting the materials or ingredients of which they are composed, their
quality, purity, origin, source, attributes, or properties, or nature of manufacture, and
selling them under such names and circumstances as to deceive the public. An
important part of these included misrepresentation of the therapeutic and corrective
properties of medicinal preparations and devices, and cosmetics, and the false
representation, expressly or by failure to disclose their potential harmfulness, that such
preparations may be safely used.
2. Representing products to have been made in the United States when the
mechanism or movements, in whole or in important part, were of foreign origin.
3. Bribing buyers or other employees of customers and prospective customers,
without the employer’s knowledge or consent, to secure or hold patronage.
4. Procuring the business or trade secrets of competitors by espionage, or by bribing
their employees, or by similar means.
5. Inducing employees of competitors to violate their contracts and enticing them
away in such numbers or under such circumstances as to hamper or embarrass the
competitors in the conduct of their business.
6. Making false and disparaging statements respecting competitors’ products and
business, in some cases under the guise of ostensibly disinterested and specially
informed sources or through purported scientific, but in fact misleading,
demonstrations or tests.
7. Widespread threats to the trade of suits for patent infringement arising from the
sale by competitors of alleged infringing products, not in good faith but for the purpose
of intimidating the trade and hindering or stifling competition; and claiming, without
justification, exclusive rights in public names of unpatented products.

TYPES OF UNFAIR METHODS AND PRACTICES

49

8. Trade boycotts or combinations of traders to prevent certain wholesale or retail
dealers or certain classes of such dealers from procuring goods at the same terms
accorded to the boycotters or conspirators, or to coerce the trade policy of their
competitors or of manufacturers from whom they buy.
9. Passing off goods for products of competitors through appropriation or simulation
of such competitors’ trade names labels, dress of goods, or counter-display catalogs,
etc.
10. Selling rebuilt, second-hand, renovated, or old products, or articles made in
whole or in part from used or second-hand materials, as new, by so representing them
or by failing to reveal that they were not new or that second-hand materials were used.
11. Buying up supplies for the purpose of hampering competitors and stifling or
eliminating competition.
12. Using concealed subsidiaries, ostensibly independent, to obtain competitive
business otherwise unavailable, and making use of false and misleading
representations, schemes, and practices to obtain representatives and make contacts,
such as pretended puzzle-prize contests purportedly offering opportunities to win
handsome prizes, but in fact mere “come-on” schemes and devices in which the
seller’s true identity and interest are initially concealed.
13. Using merchandising schemes based on lot or chance, or on a pretended contest
of skill.
14. Compelling resale price maintenance by cooperating with others in the use of
schemes and practices for compelling wholesalers and retailers to maintain resale
prices fixed by a manufacturer or distributor for resale of his product.
15. Combinations or agreements of competitors to fix, enhance , or depress prices,
maintain prices. bring about substantial uniformity in prices, or to divide territory or
business, to cut off or interfere with competitors’ sources of supply, or to close
markets to competitors; or use by trade associations of so-called standard cost systems,
price lists, or guides, or exchange of trade information calculated to bring about these
ends, or otherwise restrain or hinder free competition.
16. Intimidation or coercion of producer or distributor to cause him to organize, join,
or contribute to, or to prevent him from organizing, joining, or contributing to,
producers’ cooperative association, or other association, advertising agency, or
publisher.
17. Aiding, assisting, or abetting unfair practice, misrepresentation , and deception,
and furnishing means or instrumentalities therefor, and combining and conspiring to
offer or sell products by chance or by deceptive methods, through such practices as
supplying dealers with lottery devices, or selling to dealers, and assisting them in conducting, contest schemes as a part of which pretended credit slips

50

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

or certificates are issued to contestants, when in fact the price of the goods has been
marked up to absorb the face value of the credit slip, and the supplying of emblems or
devices to conceal marks of country of Origin of goods, or otherwise to misbrand
goods as to country of origin.
18. Various schemes to create the impression that the customer is being offered an
opportunity to make purchases under unusually favorable conditions when such is not
the case, such schemes including-(a) Sales plans in which the seller’s usual price is falsely represented as a special
reduced price for a limited time or to a limited class, or false claim of special terms,
equipment, or other privileges or advantages.
(b) The use of the “free goods” or service device to create the impression that
something is actually being thrown in without charge, when it is fully covered by the
amount exacted in the transaction as a whole, or by services to be rendered by the
recipient.
(c) Use of misleading trade names calculated to create the impression that a dealer
is a producer or importer, selling directly to the consumer, with resultant savings.
(d) Offering of false “bargains” by pretended cutting of a fictitious “regular”
price.
(e) Use of false representation that article offered has been rejected as
nonstandard and is offered at an exceptionally favorable price, or that the number
thereof that may be purchased is limited.
(f) Falsely representing that the goods are not being offered as sales in ordinary
course, but are specially priced and offered as a part of a special advertising campaign
to obtain customers or for some purpose other than the customary profit.
(g) Misrepresenting, or causing dealers to misrepresent, the interest rate or
carrying charge on deferred payments.
19. Using containers ostensibly of the capacity customarily associated by the
purchasing public with standard weights or quantities of the product therein contained,
or using standard containers only partially filled to capacity, so as to make it appear
to the purchaser that he is receiving the standard weight or quantity.
20. Misrepresenting in various ways the necessity or desirability or the advantages
to the prospective customer of dealing with the seller, such as-(a) Misrepresenting seller’s alleged advantages of location or size, or the
branches, domestic or foreign, or the dealer outlets he has.

TYPES OF UNFAIR METHODS AND PRACTICES

51

(b) Making false claim of being the authorized distributor of some concern, or
failing to disclose the termination of such a relationship, in soliciting customers of
such concerns, or of being successor thereto or connected therewith, or of being the
purchaser of competitor’s business, or falsely representing that it has been
discontinued, or falsely claiming the right to prospective customer’s special
consideration, through such false statements as that the customer’s friends or his
employer have expressed a desire for, or special interest in, consummation of seller’s
transaction with the customer.
(c) Alleged connection of a concern, organization, association, or institute with,
or endorsement of it or its product or services by, the Government or nationally known
organizations, or representation that the use of such product or services is required by
the Government.
(d) False claim by a vendor of being an importer, or a technician, or a
diagnostician, or a manufacturer, grower, or nurseryman, or of being a wholesaler,
selling to the consumer at wholesale prices, or by a manufacturer of being also the
manufacturer of the raw material entering into the product, or by an assembler of being
a manufacturer.
(e) Falsely claiming to be a manufacturer’s representative and outlet for surplus
stock sold at a sacrifice.
(f) Falsely representing that the seller owns a laboratory in which product offered
is analyzed and tested.
(g) Representing that ordinary private commercial seller and business is an
association, or national association, or connected therewith, or sponsored thereby, or
is otherwise connected with noncommercial or professional organizations or
associations, or constitutes an institute, or, in effect that it is altruistic in purpose,
giving work to the unemployed.
(h) Falsely claiming that business is bonded or misrepresenting its age or history,
or the demand established for its products, or the selection afforded, or the quality or
comparative value of its goods, or the personnel or staff or personages presently or
theretofore associated with such business or the products thereof.
(I) Claiming falsely or misleadingly patent, trade-mark, or other special and
exclusive rights.
(j) Misrepresentation. by the publisher of the advertisers’ products as compared
with competing products, services or other commercial offering, by the issuance of
seals of approval or other insignia of pretended tests, inquiries, investigations or
guaranties, or by the publication of exaggerated claims.
21. Obtaining business through undertakings not carried out, and. not intended to
be carried out, and through deceptive, dishonest, and

52

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

oppressive devices calculated to entrap and coerce the customer or prospective
customer, such practices including-(a) Misrepresenting that seller fills orders promptly, ships kind of merchandise
described, and assigns exclusive territorial rights within definite trade areas to
purchasers or prospective purchasers.
(b) Obtaining orders on the basis of samples displayed for customer’s selection
and failing or refusing to respect such selection thereafter in filling of orders, or
promising results impossible of fulfillment, or falsely making promises or holding out
guarantees, or the right of return, or results, or refunds, replacements, or
reimbursements, or special or additional advantages to the prospective purchaser such
as extra credit;, or furnishing of supplies or advisory assistance; falsely assuring the
purchaser or prospective purchaser that certain special or exclusively personal favors
or advantages are being granted him.
(c) Concealing from prospective purchaser unusual features involved in
purchaser’s commitment, the result of which will be to require of purchaser further
expenditure in order to obtain benefit of commitment and expenditure already made,
such as failure to reveal peculiar or nonstandard shape of portrait or photographic
enlargement, so as to make securing of frame therefor from sources other than seller
difficult and impracticable, if not impossible.
(d) Obtaining by deceit prospective customer’s signature to a contract and
promissory note represented as simply an order on approval.
(e) Making use of improper and coercive practices as means of exacting additional
commitments from purchasers, through such practices as unlawfully withholding from
purchaser property of latter lent to seller incident to carrying out of original
commitment, such as practice of declining to return original photograph from which
enlargement has been made until purchaser has also entered into commitment for
frame therefor.
(f) Falsely representing earnings or profits of agents, dealers, or purchasers, or the
terms or conditions involved, such as false statement that participation by merchant
in seller’s sales promotion scheme is without cost to merchant, and that territory assigned an agent, representative, or distributor is new or exclusive.
(g) Obtaining agents or representatives to distribute the seller’s products, through
promising to refund the money paid by them should the product prove unsatisfactory,
or promising that the agent would be granted right to exclusive or new territory, would
be given assistance by seller, or would be given special credit or

TYPES OF UNFAIR METHODS AND PRACTICES

53

furnished supplies, or overstating the amount of his earnings or the opportunities
which the employment offered.
(h) Advertising a price for a product as illustrated or described and not including
in such price all charges for equipment or accessories illustrated or described or
necessary for use of the product or customarily included as standard equipment, and
failing to include all charges not specified as extra.
22. Giving products misleading names so as to give them a value to the purchasing
public which they would not otherwise possess, such as names implying falsely that -(a) The products were made for the Government or in accordance with its
specifications and of corresponding quality, or that the advertiser is connected with the
Government in some way, or in some way the products have been passed upon,
inspected, underwritten, or endorsed by it; or
(b) They are composed in whole or in part of ingredients or materials, which in
fact. are contained only to a negligible extent or not at all, or that they have qualities
or properties which they do not have; or
(c) They were made in or came from some locality famous for the quality of such
products, or are of national reputation; or
(d) They were made by some well and favorably known process; or
(e) They have been inspected, passed, or approved after meeting the tests of some
official organization charged with the duty of making such tests expertly and
disinterestedly, or giving such approval; or
(f) They were made under conditions or circumstances considered of importance
by a substantial part of the general purchasing public; or
(g) They were made in a country, or city, or locality, considered of importance in
connection with the public taste, preference, or prejudice; or
(h) They have the usual characteristics or value of a product properly so
designated, as through use of a common, generic name, such as “paint,” to designate
a product lacking the necessary ingredients of paint.
23. Selling below cost or giving product without charge, with intent and effect of
hindering or suppressing competition.
24. Dealing unfairly and dishonestly with foreign purchasers and thereby
discrediting American exporters generally.
25. Coercing and forcing uneconomic and monopolistic reciprocal dealing.

54

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

26. Entering into contracts in restraint of trade whereby foreign corporations agree
not to export certain products into the United States in consideration of a domestic
Company’s agreement not to export the same commodity, nor to sell to anyone other
than those who agree not to so export the same.
27. Employing various false and misleading representations and practices attributing
to products a standing, merit, and value to the purchasing public, or a part thereof,
which they do not possess, such practices including-(a) Misrepresenting, through salesmen or otherwise, products’ composition,
nature, qualities, results accomplished, safety, value, and earnings or profits to be had
therefrom.
(b) Claiming falsely unique status or advantages, or special merit therefor, on the
basis of misleading and ill-founded demonstrations or scientific tests, or pretended
widespread tests, or of pretended widespread and critical professional acceptance and
use.
(c) Misrepresenting the history or circumstances involved in the making and offer
of the products or the source or origin thereof (foreign or domestic) or of the
ingredients entering therein, or parts thereof, or the opportunities brought to the buyer
through purchase of the offering, or otherwise misrepresenting scientific or other facts
bearing on the value thereof to the purchaser.
(d) Falsely representing products as legitimate, or prepared in accordance with
Government or official standards or specifications.
(e) Falsely claiming Government or official, or other, acceptance, use, and
endorsement of product, and misrepresenting success and standing thereof through use
of false and misleading endorsements or false and misleading claims with respect
thereto, or otherwise.
28. Failing and refusing to deal justly and fairly with customers in consummating
transactions undertaken, through such practices as refusing to correct mistakes in
filling orders; or to make promised adjustments or refunds, and retailing, without
refund, goods returned for exchange or adjustment, and enforcing, notwithstanding
agents’ alterations, printed terms of purchase contracts, and exacting payments in
excess of customers’ commitments.
29. Shipping products at market prices to customers or prospective customers or to
the customers or prospective customers of competitors without an order and then
inducing or attempting by various means to induce the consignees to accept and
purchase such consignments.

CASES IN THE FEDERAL COURTS

55

30. Inducing the shipment and sale of commodities through buyer’s issuance of
fictitious price lists and other printed matter falsely rep-resenting rising market
conditions and demand, and leading seller to ship under the belief that he would
receive prices higher than the buyer intended to or did pay.
CASES IN THE FEDERAL COURTS
COMMISSION ACTIONS IN THE UNITED STATES SUPREME, CIRCUIT, AND
DISTRICT COURTS

During the fiscal year, results favorable to the Commission were obtained in United
States courts in 36 cases, of which 1 was before the Supreme Court of the United
States, 29 were before United States circuit courts of appeals and 6 before United
States district courts. A Commission order was set aside in one case in the circuit court
of appeals.
The case in the Supreme Court in which favorable action was taken involved
Raladam Co., Detroit, the Court unanimously reversing a prior. decision by the Circuit
Court of Appeals for the Sixth Circuit setting aside a Commission order. The Supreme
Court, in two cases, denied petitions for certiorari sought by petitioners where circuit
courts of appeals had affirmed Commission orders.
Circuit courts of appeals affirmed 15 orders to cease and desist issued by the
Commission (5 with modifications) and dismissed petitions for review of orders in 11
cases.
In one case, the circuit court of appeals affirmed the judgment of a district court
adjudging a respondent in contempt for ignoring its order directing him to answer
certain questions in hearings before a Commission trial examiner; in another it upheld
the jurisdiction of the Commission over false labeling and misbranding under section
5 of the Federal Trade Commission Act; in still another it affirmed the judgment of a
district court imposing penalties for violations of a Commission order; and in three
instances it denied motions by petitioners to reopen cases and adduce additional
evidence before Commission trial examiners.
A district court granted the motion of the Commission to dismiss a suit instituted for
the purpose of stopping the trial of a case before a trial examiner.
Forty-five petitions for review of Commission cease and desist orders were filed
during the year.
PETITIONS TO REVIEW CEASE AND DESIST ORDERS

Petitions in the United States circuit courts of appeals to review cease and desist
orders issued under section 5 of the Federal Trade

56

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Commission Act and Sections 2 and 3 of the Clayton Act are discussed below.
(Except where otherwise indicated, cases involve violations of the Federal Trade Com mission Act.
United States circuit courts of appeals are designated First Circuit (Boston), etc.)

CASES DECIDED BY THE COURTS

Anchor Hocking Glass Corporation, Lancaster, Ohio, and others.--On motion of the
petitioners, the Sixth Circuit (Cincinnati) dismissed their petition for review of the
Commission order (124 F. 2d 187) The case involved a combination in restraint of
trade in glassware.
Frederic A. Clarke, Glendale, Calif.--The Ninth Circuit (San Francisco) affirmed the
judgment of the District Court for the Southern. District of California adjudging
Clarke in contempt for ignoring its order directing him to disclose, in hearings before
a Commission trial. examiner, the proportions of the Various ingredients used in the
manufacture of his “Boncquet” tablets, sold as a “blood-building” preparation Clarke
had contended that the information sought was a trade secret which he was not obliged
to reveal. The court concluded its. opinion with the statement that “appellant
confessedly refused to obey the order, so there was no error in holding him in
contempt of it.”
D. D. D. Corporation, Batavia, Ill.--The Seventh Circuit (Chicago) (125 F. 2d 679)
affirmed the Commission order in this Case after modifying it in one particular. The
order was directed against what were found to be misleading representations
concerning the curative properties of a liquid preparation known as “D. D. D.
Prescription,” advertised to “stop itching.”
Fong Poy, also known as Fong Wan, and others, operating under the firm name of
Fong Wan, Oakland, Calif.--The Ninth Circuit (San Francisco) directed the entry of
a decree in this case affirming the Commission order and commanding obedience
therewith (124 F. 2d 398). The order was based upon findings that the petitioners
were misrepresenting the therapeutic value of Chinese herbs in the treatment of cancer,
tuberculosis, diabetes, and other diseases.
Ford Motor Co., Dearborn, Mich.--The Supreme Court denied the Ford company’s
petition for writ of certiorari (314 U.S. 668). The object of the petition was to obtain
a reversal of the decision of the Sixth circuit (Cincinnati) (120 F. 2d 175) unanimously
upholding the Commission order directed against misleading advertising in connection
with the so-called “6% plan” of financing the retail sale of automobiles.
Fresh Grown Preserve Corporation, and others, Lyndhurst, N.J.--A decision (125
F. 2d 917) by the Second Circuit (New York) upheld the jurisdiction of the
Commission over false labeling and misbranding under section 5 of the Federal Trade
Commission Act. Referring to the effect of the Wheeler-Lea amendment, the court
said:

CASES IN THE FEDERAL COURTS

57

The amendment * * * did not modify the term “unfair methods of competition in
commerce,” but made unlawful what were called “unfair or deceptive acts or practices in
commerce” and by so doing enlarged instead of lessened the scope of the Jurisdiction of the
Commission. The additions found in sections 12 to 15, inclusive, were also to give the
Commission greater control over the advertising of food, drugs, cosmetics, and the like by
providing for criminal action as well as injunction.

The Gerrard Co., Inc., Chicago, and American Steel and Wire Company of New
Jersey, Cleveland.--Pursuant to stipulation of the parties, the petition for review in this
case was dismissed by the Seventh Circuit (Chicago). The Commission’s agreement
to this procedure was based upon the petitioners filing with it a report of compliance
with its order, which was directed against a violation of section 3 of the Clayton Act,
relating to petitioners’ practice of leasing and licensing wire-tying machines on
condition that they be not used with any wire except that supplied by the petitioners.
Haskelite Manufacturing Corporation, Chicago.--The Commission order in this case
was affirmed without dissent by the Seventh Circuit (Chicago). The order forbade
representations that serving trays made in part of paper were made entirely of wood,
and required the affirmative disclosure that the surfaces of such trays are made of
paper, when such is the case. The court said (127 F. 2d 765):
We think the Commission had authority to prescribe reasonable requirements for the
petitioner to meet in the interest of fair dealing, which requirements would act as guarantees
against a recurrence of the past unfair and deceptive acts.

Hudson Fur Dyeing Co., Newark, N. J.--On motion of the petitioner, the Third
Circuit (Philadelphia) dismissed the petition for review. Subsequent to its filing, the
petitioner made changes in advertising matter which were acceptable to the
Commission, and in conformity with its cease and desist order, which prohibited the
use of the name “Hudseal” as descriptive of goods composed of dyed rabbit skins. The
Commission found that this term was confused by the public with “Hudson Seal”, the
well-known designation. for seal-dyed muskrat.
Lottery cases, Chicago, New York, Portland, Ore g., Milwaukee, Minneapolis, St.
Joseph, Mo., Macon, Ga., and Birmingham, Ala.--Thirteen cases involving lottery
methods in the sale of candy and other merchandise were determined by the Federal
courts during the fiscal year, 12 of these decisions being in favor of the Commission.
Favorable decisions by the Seventh Circuit (Chicago) involved: Benjamin Jaffe,
trading as National Premium Co. and King Sales Co., Chicago (123 F. 2d 814);
Mitchell A. Bazelon and Jacob L. Bazelon, trading as Evans Novelty Co. and Premium
Sales Co., Chicago; David Kritzik, trading as General Merchandise Co., Milwaukee
(125 F.2d 351); and Philip Harry Koolish and Sara Allen Koolish, trad-

58

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

ing as Standard Distributing Co., Chicago (129 F. 2d 64).3 This court denied the
motion of the Commission for a rule to show cause why Robert Hofeller, trading as
Bob Hofeller Candy Co., Chicago, should not be adjudged guilty of and punished for
criminal contempt for violation of the court’s decree, entered in 1936, affirming the
Commission order.
The Second Circuit (New York), on motion of the Commission, dismissed petitions
for review in two cases because of the failure of the petitioners to prosecute them. The
petitioners were Alexander Weiler and Lilly Greenspan Weiler, trading as New York
Premium Novelty Co., New York, and Isidore Halperin and Morris Orenstein, trading
as Wellworth Sales Co New York.
The Fifth Circuit (New Orleans), on motion of the petitioner, Robert C. Bundy,
trading as Jackson Sales Co., Birmingham, Ala., dismissed the petition for review filed
in this case. This court also unanimously affirmed the Commission order in the case
involving Joe B. Hill and C. O. McAfee, trading as McAfee Candy Co. and Liberty
Candy Co., Macon, Ga. (124 F. 2d 104). The petitioners con tended that the order
should be set aside on the ground that it was not based on evidence, but only upon
their answer to the complaint. Rejecting this argument, the court observed that “facts
judicially admitted are facts established not only beyond the need of evidence to prove
them, but beyond the power of evidence to controvert them.”
The Eighth Circuit (St. Louis), on motion of the petitioner, dismissed the petition for
review filed by Candymasters, Inc., Minneapolis (126 F. 2d 466), it appearing that the
petitioner had discontinued the practices forbidden by the order. This court also
affirmed without dissent the Commission order in the proceeding instituted by the
Douglas Candy Co., St. Joseph, Mo. (125 F. 2(1665).
The Court of Appeals for the District of Columbia on its own motion dismissed the
petition for review filed by Samuel Nitke, New York, for failure to prosecute the case.
The Ninth Circuit (San Francisco) modified one of the four paragraphs of the order
directed against Lee Boyer’s Candy, Portland, Oreg., and affirmed the order as
modified. (128 F. 2d 261).
Caroline R. Macher and Robert J. Macher, trading as Macher Watch & Jewelry Co.
and Wholesale Watch & Jewelry Co., New York.--The Second Circuit (New York),
without dissent, affirmed the Commission order which proscribed what it found to be
false claims as to the respondents’ status as wholesalers of jewelry (126 F. 2d 420).
Moretrench Corporation, Rockaway, N. J.--The Second Circuit (New York)
unanimously affirmed the order in this case, after modifying it in certain particulars.
The practice forbidden was disparagement of competitive products, such as well
points, pumps, and
3

Petition for certiorari was denied November 23, 1942.

CASES IN THE FEDERAL COURTS

59

equipment used in drawing water from wet Soil during excavation work. Concerning
certain advertising matter used by the petitioner, which was banned by the
Commission order, the court said: “In such matters we understand that we are to insist
upon the most literal truthfulness. Federal Trade Commission v. Standard Education
Society, 302 U. 5.112, 116. Nor is it an excuse for a statement after it is known to be
false, that it is put forward as a quotation.”
Perfume cases--New York, Boston, and Wilmington, Del.--Three cases involving
false and misleading advertising in the sale of perfumes and kindred products were
disposed of during the year. The Commission orders forbade representations by the
petitioners that their products, compounded in the United States from imported and
domestic ingredients, were made in France. The cases were: Second Circuit (New
York), Establishments Rigaud, Inc., and others, New York, in which the order was
modified and affirmed (125 F. 2d 590); First Circuit (Boston), Normandie et Cie,
Boston, in which a consent decree was entered affirming the order and commanding
obedience thereto; and Third Circuit (Philadelphia), Coty, Inc., Wilmington, Del., and
others, which was dismissed on stipulation, the petitioners having filed a report
showing changes in labels and advertisements in compliance with the order.
The Rabhor Co., Inc., New York.--This case was disposed of by the entry of a
consent decree by the Second Circuit (New York) modifying the Commission order
by striking one of the five paragraphs therefrom, and affirming and enforcing it as
modified. The order prohibited what the Commission found to be misleading advertising with respect to the nature and quality of fabrics from which men’s wearing
apparel was made.
Raladam Co., Detroit.--The Commission order, which was directed against what
were found to be unwarranted claims with respect to a desiccated thyroid preparation
known as “Marmola,” advertised extensively as a weight-reducing agent, was set aside
by the Sixth Circuit (Cincinnati) (123 F. 2d 34). The Supreme Court (316 U. S. 149),
in turn, by an undivided Court, reversed the judgment of the lower court, “with
directions that the order of the Federal Trade Commission be affirmed.” It held that
the Commission’s findings had been made “with meticulous particularity,” that they
constituted “an adequate basis for the Commission’s order” and that they “should have
been sustained [by the lower court] against the attack made upon them.” The Supreme
Court stated:
It is not necessary that the evidence show specifically that losses to any particular trader or
traders arise from Raladam’s success in capturing part of the market. One of the objects of the
Act creating the Federal Trade Commission was to prevent potential injury by stopping unfair
methods of competition In their incipiency. And when the Commission finds as it did here that
misleading and deceptive statements were made with reference to the quality of
492924---43-----5

60

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

merchandise in active competition with other merchandise it is also authorized to infer that trade
will be diverted from competitors who do not engage in such “unfair methods.”

Scientific Manufacturing Co., Scranton, Pa.--The Third Circuit (Philadelphia) set
aside the order in this case (124 F. 2d 640). The Commission had found that the
petitioner corporation and its president and owner published pamphlets devoted to an
exposition of the claimed dangers attendant upon the use of aluminum utensils for the
preparation and storage of foods, such as the causing of cancer, Bright’s disease,
diabetes, and liver trouble. The court held that while it was true that the effect of the
Wheeler-Lea amendment to the Federal Trade Commission Act was “to so broaden the
Commission’s jurisdiction as to enable it to act where only the public interest was
adversely affected by the unfair practices,” nevertheless “the Commission’s
intervention is limited to acts or practices in the affected trade” and “the present
petitioners not being engaged or materially interested in the cooking utensil trade, the
Commission was without power to enjoin their sale and distribution of the pamphlets.”
The Stevenson Corporation, and others, New York.--An order was entered by the
Second Circuit (New York) withdrawing the petition for review and dismissing the
proceedings, this action being based upon stipulation of the parties. The Commission
had directed the petitioners to cease and desist, in connection with the sale and
distribution of wooden containers used in the packaging of fruit and vegetables, from
entering into, carrying out, or aiding or abetting the carrying out of agreements,
understandings, combinations, or conspiracies for the purpose or with. the effect of
restraining or eliminating competition in the purchase or sale of such products.
Tubular Rivet & Stud. Co., Wollaston, Mass.--This concern instituted injunction
proceedings against the Commission in the District Court of the United States for the
District of Columbia, the object of the suit being to stop the trial of the case before a
Commission trial examiner and to require the Commission to furnish a bill of
particulars of its charges. The complaint had charged the company with entering into
exclusive-dealing contracts in violation of section 3 of the Clayton Act. The court
granted the Commission’s motion to dismiss the suit. The company noted an appeal
to the court of Appeals for the District of Columbia, which it subsequently withdrew.
Von Schrader Manufacturing Co., Racine, Wis.--The petition for review filed in this
case was dismissed by the Seventh Circuit (Chicago) on stipulation of the parties. The
Commission order proscribed misrepresentations concerning the efficiency of the
petitioner’s electrical rug-washing machine as a destroyer of germs and

CASE IN THE FEDERAL COURTS

61

exaggerated statements relative to the earning power of the purchasers of the
machines. Subsequent to the petition for review, the company modified its advertising
so as to comply with the order.
CIVIL PENALTIES UNDER THE FEDERAL TRADE COMMISSION ACT

Five cases which had been certified to the Attorney General during preceding years
under section 16 of the Federal Trade Commission Act were disposed of and civil
penalties in the sum of $6,500 were collected or were in the process of collection at
the end of the year, as follows:
U. S. v. Oppenheim, Collins & Co., Inc., New York.--District Court for the Southern
District of New York; judgment for $1,500.
U. S. v. Levore Co., Chicago.--District Court for the Northern District of Illinois;
judgment for $500.
U. S. v. Gynex Corporation, New York.--District Court for the Southern District of
New York; judgment for $500.
U. S. v. Carl E. Koch and others (American Beauty Products Co.), Chicago.-District Court for the Northern District of Illinois; judgment for $2,500.
U.S. v. Midwest Studios, inc., Portland, Oreg.--District Court for the District of
Oregon; judgment for $1,500.
The Ninth Circuit (San Francisco) (126 F. 2d 601) unanimously affirmed the
judgment of the district court imposing. penalties of $3,250 upon Joseph A. Piuma for
violation of the Commission’s order. (See Annual Report 1941, p.105.)
CASES PENDING IN THE COURTS

Adolph Kastor & Bros., lnc., New York.--Second Circuit (New York), passing-off
of name, Boy Scout knives.
American Medicinal Products, lnc., and others, Los Angeles.--Ninth Circuit (San
Francisco), nondisclosure of harmful potentialities of flesh-reducing compound.
Earl Aronberg, trading as Positive Products Co. and Rex Products Co., Chicago.-Seventh Circuit (Chicago), nondisclosure of dangerous character of emmenagogue.
Associated News Photographic Service, lnc., and others, New York.-Second Circuit
(New York), misleading use of “News” in name of photographers without newspaper
connections.
Benton Announcements, Inc., Buffalo.--Second Circuit (New York),
misrepresentation of embossed printing as “engraving.” 5
Charles of the Ritz Distributors Corporation, New York.--Second Circuit (New
York), unwarranted claims for benefits to be derived from cosmetics.
4
5

Petition for certiorari was denied October 12, 1942.
Order unanimously affirmed July 6, 1942, 130 F. 2d 254.

62

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

De Forest’s Training, lnc., Chicago.--Seventh Circuit (Chicago), exaggeration of
opportunities for employment for graduates of correspondence courses in television,
etc.
John J. Fulton Co., San Francisco.--Ninth Circuit (San Francisco),
misrepresentation of “Uvursin” as remedy for diabetes.
Joan Clair Gelb, now known as Joan C. Vauglian, California; Leon A. Spilo,
Stamford, Conn., and Morris Gelb, New York.--Second Circuit (New York),
misrepresentation of hair dyes.
General Motors Corporation and General Motors Sales Corporation. Detroit.-Sixth Circuit (Cincinnati), coercive and monopolistic practices in relations with
dealers.
Hiram Carter, hic., and others, Elmhurst, Long Island, N. Y.--Court of Appeals for
the District of Columbia, misrepresentation of efficacy of proprietary medicines.
International Parts Corporation, Chicago.--Seventh Circuit (Chicago), exaggeration
of efficiency of automobile mufflers, etc.
Jergens Woodbury Sales Corporation, Cincinnati.--Sixth Circuit (Cincinnati),
misrepresentation of germicidal properties of cold cream and soap.
William F. Koch, Louis G. Koch, and Koch Laboratories, lnc., Detroit.--District
Court for the Eastern District of Michigan (Detroit), injunction suit involving false
advertisements of medicinal preparations.
Albert Lane, Berkeley, Calif.--Ninth Circuit (San Francisco), false claims as to status
as consumers’ research organization.
J. B. Lippincott Co., Philadelphia.--Third Circuit (Philadelphia), restraint of trade
in medical books.
Lottery Cases, Chicago.--Seventh Circuit (Chicago) : Louis Keller and William
Carsky, trading as Casey Concession Co.; Alvin B. Wolf, trading as De Luxe Products
Co. and Delco Novelty Co.; and Boulevard Candy Co.
E. B. Muller & Co ., Port Huron, Mich., and Heinr. Franck Sons, lnc., Flushing, N.
Y.--Sixth Circuit (Cincinnati), restraint of trade in chicory.
Philip R. Park, lnc., Los Angeles.--Ninth Circuit (San Francisco), false claims for
curative properties of “Parkelp Tablets.”
Parke, Austin & Lipscomb, lnc., and Smithsonian Institute Series, lnc., New York.-Second Circuit (New York), misrepresentation of relationship with Smithsonian
Institution, of Washington, D. C.
Perfect Voice Institute, Chicago.--Seventh Circuit (Chicago), false and misleading
advertising of course in voice training.
Perfume case-Houbigant, lnc., and others, New York.--Second Circuit (New York),
misrepresentation of domestically compounded products as imported.

CASES IN THE FEDERAL COURTS

63

Pond’s Extract Co., New York.--Second Circuit (New York), misrepresentation of
curative properties of cosmetics.
Post Institute Sales Corporation, New York.--Second Circuit (New York), false and
misleading advertising, hair and scalp preparations.
Salt Producers Association., Detroit, and others --Seventh Circuit (Chicago),
conspiracy in restraint of trade.
Surveying-Drafting-Coaters Section of Scientific Apparatus Makers of America,
Philadelphia, and others.--Seventh Circuit (Chicago), combination in restraint of trade
in various products used by surveyors, engineers, etc.
The Sebrone Co., and others, Chicago.--Seventh Circuit (Chicago),
misrepresentations, dandruff “cures” and deodorants.
Segal Optical Co., New York.--Second Circuit (New York), misrepresentation of
imported (Japanese) optical goods as domestic.
Signode Steel Strapping Co., Baltimore.--Fourth Circuit (Richmond), exclusivedealing contracts in violation of section 3 of Clayton Act.
Stanley Laboratories, Inc., and others, Portland, Oreg.--Ninth Circuit (San
Francisco), misleading advertisements of “M. D. Medicated Douche Powder.”
Clara Stanton, Druggist to Women, Denver.--Tenth Circuit (Denver),
misrepresentations concerning weight-reducing preparation.
Stephen Rug Mills, New York.--Second Circuit (New York), misleading use of
“Mills” in trade name.
United States Steel Corporation, American Bridge Co., Carnegie-Illinois Steel
Corporation, American Steel & Wire Co. of New Jersey, and Tennessee Coal, Iron &
Railroad Co.--Third Circuit (Philadelphia) and Fifth Circuit (New Orleans),
“Pittsburgh plus” prices. for rolled-steel products in violation of the Clayton and
Federal Trade Commission Acts.
Warner’s Renowned Remedies Co., Minneapolis.--Court of Appeals for the District
of Columbia, misleading advertising of products sold for feminine hygiene.
Wholesale Dry Goods Institute, lnc., New York, and others.--Second Circuit (New
York), restraint of trade.

64

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

TABLES SUMMARIZING WORK OF THE LEGAL DIVISIONS
AND COURT PROCEEDINGS, 1915-42
TABLE 1.--Preliminary inquiries
FISCAL YEAR ENDED JUNE 80, 1942

CUMULATIVE SUMMARY, 1915 TO JUNE 30, 1942

Pending beginning of year
Instituted during year
Total for disposition

Inquiries instituted
28,788
Consolidated with other proceedings
34
Closed after investigation
20,653
Docketed as applications for
complaint
8,016

121
236
357

Consolidated with other proceedings 8
Closed after investigation
230
Docketed as applications for cornplaints
34
Total disposition during year 272
Pending end of year
85

Total disposition
Pending June 30, 1942

28,703
85

TABLE 2.--Applications for complaints
FISCAL YEAR ENDED JUNE 50, 1942
Pending beginning of year
Applications docketed
Rescissions:
To complaints
Settled by stipulation to cease
and desist
Settled by acceptance of TPC
rules
Consolidated with other proceedings
Dismissed for lack of merit
Closed for other reasons
Total for disposition

CUMULATIVE SUMMARY, 1915 TO JUNE 30, 1942

1,421
872
0
0
0
0
0
3
2,296

To complaints
233
Settled by stipulation to cease and
desist
508
Settled by acceptance of TPC rules
0
Consolidated with other proceedings
21
Dismissed for lack of merit
0
Closed for other reasons 1
502
Total disposition during year
1,264
Pending end of year
1,032

Applications docketed
17,590
Rescissions:
To complaints
10
Settled by stipulations to cease and desist 218
Settled by acceptance of
TPC rules
6
Consolidated with other
proceedings
0
Dismissed for lack of
merit
81
Closed for other reasons
40
Total for disposition
17,945
To complaints
4,373
Settled by stipulations to
cease and desist
5,682
Settled by acceptance of TPC
rules
97
Consolidated with other proceedings
105
Dismissed for lack of merit
3,863
Closed for other reasons 1
2,793
Total disposition
16,913
Pending June 30, 1942
1,032

1 This classification includes such reasons as death, business or practices discontinued,
private controversy, controlling court decisions, etc.

TABLES SUMMARIZING WORK OF THE LEGAL DIVISIONS

65

TABLE 3.--Complaints
FISCAL YEAR ENDED JUNE 30, 1942

CUMULATIVE SUMMARY, 1915 TO JUNE 30, 1942

Pending beginning of year
Complaints docketed
Rescissions :
Orders to cease and desist
Settled by stipulations to cease
and desist
Settled by TPC rules
Dismissed for lack of merit
Closed for other reasons 1
Total for disposition

Complaints
4,778
Rescissions:
Orders to cease and desist
60
Settled by stipulations to cease and desist 1
Settled by acceptance of
TPC rules
0
Dismissed for lack of
merit
10
Closed for other reasons 1
1
Total for disposition
4,850
Complaints rescinded
12
Orders to cease and desist
3,317
Settled by stipulations to case
and desist
56
Settled by acceptance of TPC
rules
23
Dismissed for lack of merit
899
Closed for other reasons 1
172
Total disposition
4,479
Pending June 30,1942
371

410
249
8
1
0
0
0
668

Complaints rescinded
0
Orders to cease and desist
250
Settled by stipulations to cease and
desist
2
Settled by acceptance of TPC rules
0
Dismissed for lack of merit
22
Closed for other reasons 1
23
Total disposition during year
297
Pending end of year
37

1 This classification includes such reasons as death, business or practices discontinued, private
controversy, controlling court decisions, etc.

TABLE 4.--Court proceedings--orders to cease and desist--petitions for review-lower courts
FISCAL YEAR ENDED JUNE 30, 1942

CUMULATIVE SUMMARY, 1915 TO JUNE 30, 1942

Pending beginning of year
Appealed

23
42

Total for disposition
Decisions for Commission
Decisions for others
Petitions withdrawn
Total disposition during year
Pending end of year

65
15
2
11
28
37

Appealed
Decisions for Commission
Decisions for Others 1
Petitions withdrawn
Total disposition
Pending June 30, 1942

800
122
94
47
288
37

1 This table lists a cumulative total of 94 decisions m favor of the respondents in Commission cases
before the United States Circuit Courts of Appeals. However, the Grand Rapids furniture (veneer) group
(with 25 different docket numbers) was in reality 1 case, with 25 different subdivisions. It was tried,
briefed, and argued as I case and was So decided by the court of appeals. The same held true of the curbpump group (with 12 different subdivisions), the Royal Milling Co. group (with 6 different subdivisions),
and the white Pine cases (12 subdivisions). In reality, therefore, these 55 docket numbers mean but 4
cases; and, If cases and not docket numbers are counted, the total of decisions in favor of the respondents
would be 43.
NOTE.--During the period 1919-1938, inclusive, 58 petitions by the Commission for enforcement of
orders to cease and desist were passed upon by courts. Of these proceedings, 54 were decided in favor
of the Commission; 4 in favor of adversaries. Petitions for enforcement were subsequently made
unnecessary by amendment of the Federal Trade Commission Act making orders finally effective unless
review is sought by respondents within 60 days after service of an order.

66

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION
TABLE 5.--Court proceedings.--orders to cease and desist--petitions for review-Supreme Court of the United States

FISCAL YEAR ENDED JUNE 30, 1942

CUMULATIVE SUMMARY, 1915 TO JUNE 30, 1942

Pending beginning of year
Appealed by Commission
Appealed by others

1
1
1

Total for disposition
Decisions for Commission
Decisions for others
Petitions withdrawn by Commission
Certiorari denied Commission
Certiorari denied others
Total disposition during year
Pending end of year

3
1
0
0
0
2
3
0

Appealed by Commission
Appealed by others

46
35

Total appealed
Decisions for Commission
Decisions for others
Petitions withdrawn by Commission
Certiorari denied Commission
Certiorari denied others
Total disposition
Pending June 30, 1942

81
27
13
2
9
30
81
0

TABLE 6.-Court proceedings-mandamus, injunction, etc.--lower courts
FISCAL YEAR ENDED JUNE 30, 1942

CUMULATIVE SUMMARY, 1915 TO JUNE 30, 1942

Pending beginning of year
Instituted by Commission
Instituted by others

0
2
2

Total for disposition
Decisions for Commission
Decisions for others
Petitions withdrawn by Commission
Petitions withdrawn by others
Total disposition during year
Pending end of year

4
2
1
0
0
3
1

Instituted by Commission
Instituted by others
Total Instituted
Decisions for Commission
Decisions for others
Petitions withdrawn by Commis
sion
Petitions withdrawn by others
Total disposition
Pending June 30, 1942

70
32
102
75
17
4
5
101
1

TABLE 7.--Court proceedings--mandamus, injunction, etc.--Supreme Court of the
United States
FISCAL YEAR ENDED JUNE 30, 1942

CUMULATIVE SUMMARY, 1915 TO JUNE 30, 1942

Pending beginning of year
Appealed by Commission
Appealed by others

0
0
0

Total for disposition

0

Decisions for Commission
Decisions for others
Certiorari denied Commission
Certiorari denied others
Total disposition during year
Pending end of year

0
0
0
0
0
0

Appealed by Commission
Appealed by others

8
2

Total appealed
Decisions for Commission
Decisions for others
Certiorari denied Commission
Certiorari denied others

10
2
5
1
2

Total disposition
Pending June 30, 1942

10
0

PART III. TRADE PRACTICE CONFERENCES
RULES OF FAIR COMPETITION ESTABLISHED
The trade practice conference procedure has for its purpose the establishment, by the
Commission, of trade practice rules for the protection of industry, trade, and the
purchasing public against unfair competitive practices. Under this procedure,
conferences are conducted for industries and effective means are. made available for
Such groups or other interested or affected parties to participate voluntarily with the
Corn-mission in making provision for the elimination of trade abuses. Thus,
cooperative action among business competitors within the law and with the aid of
Commission Supervision may properly be taken to end unfair trade practices.
Representatives of consumer groups are likewise afforded means under the procedure
for participating in the establishment and carrying out of rules in the interest of the
public.
The different competitive practices or methods, which under the statutes and the
various decisions of the courts or the Commission are considered to fall within the
inhibitions of the law, are clarified and listed in the form of specific rules applicable
to the particular conditions existing in the industry concerned. Such clarification and
codification of legal requirements and the organization of cooperative endeavor under
supervision of the Commission in the elimination of undesirable practices and the
maintenance of fair competitive conditions are vastly important to industry, to the
public, and to the Government. It leads to the wholesale elimination and abandonment
of unfair and illegal methods of competition, thereby bringing to legitimate business
and the purchasing and consuming public relief and protection from harmful
exploitation and the waste and burdens of such methods. Such voluntary cooperation
in the elimination of harmful practices also results in substantial saving to the
Government and to business in the expense which otherwise might necessarily be
incurred in instituting a multiplicity of compulsory legal proceedings against
individual offenders to require cessation of the practices in question.
Rules appropriate for the Commission’s approval or sanction may include not only
provisions for the elimination of practices which are illegal per se, or are contrary to
the general public interest, but also provisions for fostering and promoting practices
which are designed to aid fair competition and to elevate the standards of business
ethics in harmony with public policy.
67

68

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Procedure for establishing indus try rules.--The procedural steps and requirements
applicable to industry proceedings for the establishment of trade practice rules,
including the filing of application, the holding of industry conferences and public
hearings, and the promulgation of industry rules, are covered in the Commission’s
Rules of Practice. (See Rule XXVII, p.114.)
Trade Practice Conference Division.--This division is charged with the duty of
conducting the various activities relative to the formulation and approval of trade
practice rules, the holding of industry conferences in such matters, the administration
and observance of promulgated rules, and all other staff duties incident to the trade
practice conference procedure. The division is also charged with the Various duties
relating to administration of the Wool Products Labeling Act and the rules and
regulations promulgated thereunder. (See p.75.)
GROUP I AND GROUP II RULES DEFINED

Trade practice rules as finally promulgated are classified by the Commission as
Group I and Group II rules, respectively:
Group I rules.--The unfair trade practices which are embraced in Group I rules are
considered to be unfair methods of competition, unfair or deceptive acts or practices,
or other illegal practices, prohibited under laws administered by the Federal Trade
Commission, as construed in the decisions of the Commission or the courts; and
appropriate proceedings in the public interest will be taken by the Commission to
prevent the use, by any person, partnership, corporation, or other organization subject
to its jurisdiction, of such unlawful practices in commerce.
Group II rules.--These rules embrace the wholly Voluntary or recommended
industry practices as distinguished from compulsory requirements. No such industry
rule is received by the Commission unless the provision is in harmony with law and
the public interest, and is constructively in support of the maintenance of fair competitive conditions in the industry.
TRADE PRACTICE CONFERENCE ACTIVITIES DURING THE YEAR

The trade practice conference work of the Commission is divided into two general
divisions: (1) activities pertaining to the establishment and promulgation of new rules
for various industries and (2) administration of existing rules promulgated during the
current and previous years.
New rules promulgated during Fiscal year.--Trade practice rules for the following
industries were promulgated during the fiscal year: (1) beauty and barber equipment
and supplies; (2) luggage and related products; (3) rayon and silk dyeing, printing, and
finishing;

TRADE PRACTICE CONFERENCES

69

(4) sun glass; and (5) ribbon. Rules promulgated for the ribbon industry represent an
extension of the rules previously promulgated. The industries named have an estimated
annual volume of business of $250,000,000 in the aggregate.
In accordance with the usual procedure and prior to promulgation of rules for the
industries, drafts of the proposed rules were made available to all interested or affected
parties, affording them opportunity to present, for the consideration of the
Commission, such pertinent views as they might desire to offer and to be heard in the
premises.
The extent of the business operations of a number of the industries for which rules
are in effect is shown by the fact that some 35 of the last 50 odd industries receiving
rules have an estimated annual sales volume of approximately 5 ½ billion dollars.
Pending trade practice proceedings.--Trade practice proceedings, in addition to
those for which rules were promulgated, were under way for other industries and were
pending in various stages of progress at the close of the fiscal year. Respecting some
of these, the general industry conferences had been assembled and held for the purpose
of considering and formulating proposed rules. In several instances the proposed rules
had been released by the Commission and public hearings thereon held. In other cases
where the proceedings were less advanced, the necessary preliminary study and
consideration had been undertaken preparatory to further action.
Besides the various industries for which the Commission had approved trade
practice rules, or for which proceedings had been instituted and were pending at the
close of the fiscal year, other groups also contacted the Commission to explore the
possibilities of establishing rules for their respective industries.
INDUSTRY RULES IN EFFECT AND THEIR ADMINISTRATION

Administration of rules.--This work covers the necessary compliance activities,
interpretation of rules, and their application to specific situations arising in different
industries. It concerns not only those rules promulgated during the fiscal year but also
those issued in prior years and remaining in effect.1 These number many hundred of
rules and cover scores of industries. For example, the last 55 industries for which
trade practice proceedings had been held have a total of 955 rules of which 838 are in
Group I, and 117 in Group II.
1 Rules when promulgated for an industry are Issued in pamphlet form and are avail-able to interested
parties upon application to the Commission. A 1-volume compilation of the various sets of rules
promulgated for different industries from September 19 1935, to August 31, 1939, may be purchased from
the superintendent of Documents, Government Printing office, Washington, D. C. (287 pp.), for 30 cents
a copy.

70

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

The necessary correspondence was conducted throughout the year in regard to
existing rules, particularly as affecting compliance with the provisions and in general
affording assistance to industry members in the proper application and observance of
rules in order to promote the use of fair practices and protection of the public interest.
Likewise, members of industries and other interested parties or groups frequently
conferred with representatives of the Commission where necessary or desirable in
connection with the operation of the rules. In cases of alleged objectionable practices
in conflict with the rules, correction or adjustment was effected through cooperative
effort in nearly all instances. Results obtained demonstrated a primary objective of the
trade practice rules, namely, the wholesale elimination of unfair competitive methods
without the expense of litigation. However, in the few cases where compulsory
proceedings were necessary to effect correction, appropriate action to that end was
taken.
Constructive and widespread compliance with approved rules on the part of
members of industry was indicated throughout the year, with increasing benefit to the
public and to business.
INFORMATIVE LABELING OF CONSUMER GOODS

Informative labeling enters extensively into the work of the Commission under the
trade practice conference rules. It is also a primary objective of the Wool Products
Labeling Act, approved October 14, 1940, which is administered by the Commission.
(See pt. IV of this report.) Fiber identification, or what is generally referred to as
“Truth in Fabrics,” forms a large part of such informative labeling work. While
consumer goods containing, or purporting to contain wool, are subject to such Wool
Act labeling, similar fiber identification of other textiles, and informative labeling of
various lines of merchandise outside the field of textiles, are covered by trade practice
conference rules.
In formative labeling may be said to have a twofold purpose: (1) to aid intelligent
purchasing and to prevent deception by informing consumers as to what they are to
receive for their money, thus enabling them to be in a better position to judge quality
and to buy according to their needs or preferences; and (2) to protect business from the
unfair commercial practices attendant upon the sale of competing articles under
conditions of misleading representations or deceptive concealment of the facts.
Informative labeling rules established under trade practice conference procedure and
their administration are proceeding with constructive results of far-reaching character.
Products containing rayon in whole or in part are covered by the trade practice rules
for the rayon industry, promulgated October

TRADE PRACTICE CONFERENCES

71

26, 1937. Those containing silk in whole or in part are covered by the trade practice
rules for the silk industry, promulgated November 4, 1938. Corresponding rules for
linen and part linen merchandise were promulgated February 1, 1941.
Informative labeling for all types of hosiery is the subject of the trade practice rules
for the hosiery industry, issued by the Commission on May 15, 1941. Similar rules
covering fur garments and fur products generally were promulgated June 17, 1938.
Informative labeling provisions on the subject of shrinkage of woven cotton merchandise wore put into effect June 30, 1938. Other textile provisions are found in the
rules promulgated for the infants’ and children’s knitted outerwear industry, June 28,
1939; uniform industry, May 18, 1940, and ribbon industry, June 28, 1939, and June
30, 1942.
Established informative labeling provisions also are found in the different sets of
trade practice rules promulgated for the following industries on the dates mentioned:
Putty manufacturing, June 30, 1939; mirror manufacturing, July 19, 1939; luggage
and related products, September 17, 1941; paint and varnish brush manufacturing,
January 14, 1939; wholesale jewelry, March 18, 1938; curled hair, January 12, 1940;
toilet brush manufacturing, December 31, 1937; rubber tire, October 17, 1936, and sun
glass, December 23, 1941.
Rules providing for informative disclosure in advertising and selling methods have
also been issued for such industries as tomato paste manufacturing, September 3, 1938;
sardine, March 5, 1940; tuna fish, August 27, 1940, and macaroni, noodles, and related
products, July 7, 1938.
TYPES OF PRACTICES COVERED IN APPROVED RULES

Following are illustrations of the variety of subjects covered under trade practice
rules now in effect:
Misbranding; misrepresentation in various forms, including false or misleading
advertising; deceptive packaging; defamation of competitors or disparagement of their
products; impersonation or mis-representation to obtain competitors’ trade secrets;
harassment of competitors by circulation, in bad faith, of threats of infringement suits;
price discriminations to injure, prevent, or destroy competition; discriminations and
harmful practices in matters of rebates, refunds, discounts, credits, brokerage,
commissions, services, etc.; commercial bribery; inducing breach of competitor’s
contract; false invoicing; imitation of competitor’s trade-marks, trade names, brands,
etc.; substitution and “passing off”; deceptive use of so-called “free goods” deals;
lottery schemes; use of consignment distribution to close competitors’ trade outlets;
use of deceptive types of containers simulating standard and generally recognized
types; use of deceptive depic-

72

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

tions (photographs, engravings, cuts, etc.) in describing industry products; selling
below cost with the purpose and effect of sup pressing competition, restraining trade,
or creating a monopoly; and use of “loss leaders” as a deceptive or monopolistic
practice.
Other subjects embraced in the rules are: enticing a way employees of a competitor;
use of misleading guarantees, price quotations, price lists, terms of sale, etc.; full-line
forcing as a monopolistic weapon; combinations or conspiracies to fix prices, suppress
competition, or restrain trade; unfair bidding methods; misrepresentation as to possible
earnings or opportunities afforded on completion of correspondence school courses
or as to Government connection with, or endorsement of, any school, or respecting any
training or services offered by such school; falsely representing offers as “special” or
“limited”; deceptive sales of regular lines as “close-outs” to induce belief bargains are
available; representing products as conforming to recognized industry standards when
such is not the fact; misuse of such words or terms as “perfect”, “perfect cut”,
“commercially perfect”, “real”, “genuine”, “natural”, etc., in describing precious
stones or their imitations; misuse of term ‘Crookes” as applied to sun glasses; misrepresenting kind, quality, thickness, or backing of mirrors; use of fictitious animal
designations in description of furs; misrepresenting character, extent, or type of
business engaged in; representing retail prices as wholesale; use of false or deceptive
testimonials; misuse of terms “pullorum tested”, “blood tested”, etc., as applied to
baby chicks; deceptive use of the terms “waterproof”, “water repellent”, “dustproof”
or “warp-proof”, as applied to luggage or related products; false representations
respecting tube capacity of radio sets and their range or receptivity; misuse of such
terms as “all-wave” “world-wave”, “world-wide wave”, etc.; misuse of words or terms
“bristle”, “pure bristle”, etc., in sale of toilet brushes; deceptive use of “help wanted”
or other employment columns in publications; interfering with competitors’ right of
purchase or sale; representing domestic products as imported, or imported products as
domestic; use of misleading or deceptive representations in procuring sales representatives; use of deceptive titles or names in selling books under the subscription plan;
misusing terms relating to types of construction or weave of textiles; misuse of terms
“extra fancy”, “extra select”, “extra quality”, “de luxe”, “choice”, etc., to describe tuna
fish products; misuse of the words or terms “lisle cotton”, “cotton lisle”, “crepe”, etc.,
to describe hosiery products; deceptive use of terms “hand spun" “hand woven”, “hand
loomed”, “hand printed”, and “hand embroidered”, in describing linen products; and
various other forms of misrepresentation, including false or misleading advertising and
deceptive labeling respecting the quantity, quality, grade, size, material,

TRADE PRACTICE CONFERENCES

73

content, composition, on origin, use, manufacture, preparation, distribution of any
industry product; and aiding or abetting another in the use of an unfair trade practice.
Various other rules provide for disclosure of fiber content and proper marking of
textile merchandise made of rayon, silk, or linen, or of two or more fibers containing
either rayon, silk, or linen; disclosure as to remaining shrinkage in so-called preshrunk
merchandise; disclosure of fact that apparently new products are not new, but are
second-hand, rebuilt, or renovated; disclosure that products are artificial or imitations
and not real or genuine; disclosure of country of on gnu of imported products;
prevention of marketing of substandard or imitation products as and for the standard
or genuine, and the specification of minimum requirements for standard or genuine
products; proper nomenclature for industry products; disclosure as to true composition
of paint and varnish brushes; as to imperfect or defective merchandise; as to use of
adulterant or substitute for linseed oil in respect to putty products; as to presence of
metallic weighting in silk or silk products; as to minimum yardage of ribbons; as to
true functions of radio parts and accessories; and as to quality, quantity, and size of
ripe olives packed in cans and other opaque containers.

PART IV. WOOL PRODUCTS LABELING ACT
INFORMATIVE LABELING OF WOOLEN PRODUCTS BRINGS BENEFITS TO
PUBLIC AND BUSINESS

The Wool Products Labeling Act of 1939, approved by the President on October 14,
1940, became effective July 14, 1941, after the lapse of the preparatory period of 9.
months permitted under the statute. Subject to certain exceptions, it provides for the
labeling of products which contain, purport to contain, or are represented as containing
“wool,” “reprocessed wool,” or “reused wool” and manufactured for or introduced in
“commerce” as defined in section 2.
As stated in its title, it is an act to protect producers, manufacturers, distributors, and
consumers from the unrevealed presence of substitutes and mixtures in spun, woven,
knitted., felted, or otherwise manufactured wool products. Provision is made for
disclosure of the kind and percentages of the different fibers of which the article is
made, including the respective percentages of "wool," “reprocessed wool,” and
“reused wool” as defined in the statue. The label required to be affixed to the product
is to be identified with the name of the manufacturer or other qualified name of seller.
In addition to disclosure of fiber content, the label is to reveal the percentages of
loading and adulterating material which are present in the goods if any have been used.
The required label or mark, or a proper substitute, is to remain on the merchandise
until it reaches the ultimate purchaser.
Protection of the consumer and the safeguarding of fair practices in merchandising
are primary objectives of the law. It is directed against the evils of nondisclosure of
fiber content, of misinformation and misbranding, of irresponsible labeling, and the
like, with the purpose of eliminating the economic waste, the harmful exploitation, and
the unfair competitive effects of such evils. In this regard the Statute supplies a longfelt need to scrupulous business and to the purchasing public. In short, the act brings
to the public, to business, and to all concerned the benefits of informative labeling, or
what is commonly referred to as “Truth in Fabrics.” Woolen clothing, and woolen
products generally, to which the act applies, are essentials affecting the entire
population. That honesty and fair dealing in the distribution of these commodities
should obtain is necessarily a matter of importance to the general welfare.
492824--43----6

75

76

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Wool Act rules and regulations.--The Wool Products Labeling Act authorized and
directed the Commission to make such rules and regulations as might be necessary and
proper for its administration and enforcement. The Commission adopted a procedure
whereby industry members and other interested parties were afforded opportunity to
contribute their views and suggestions in arriving at rules which would be of the
maximum assistance to industry and trade and be in consonance with the law, and also
afford full protection of the public interest. Accordingly, the Commission promulgated
rules and regulations, effective July 15 1941, which afford instructions and guidance
as to how those subject to the act may proceed in various situations and assure
themselves of being within the requirements of the law.
Manufacturers’ registered identification numbers.--Rule 4 of the rules and
regulations provides for the assignment by the Commission of registered identification
numbers upon application by manufacturers of wool products residing in the United
States. The number is provided for use on the label as a means of identifying the
respective manufacturer when the name of the dealer or reseller appears and not the
name of the manufacturer of the wool product who affixed the label. At the close of
the fiscal year and pursuant to applications duly filed under this rule, 4,354
manufacturers had been registered and assigned identification numbers.
Continuing guaranties.--As a means of protecting distributors, dealers, and other
resellers from the charge of misbranding when relying in good faith upon the
manufacturer’s statement of content, provision is made in section 9 of the act whereby
such protection. may be afforded by a guaranty on the part of the manufacturer. Such
guaranty may be either (1) a separate guaranty specifically designating the wool
product guaranteed, or (2) a continuing guaranty filed with the Commission applicable
to all products handled by a guarantor and in such form as the Commission may
prescribe. The form prescribed by the Commission is set forth in rule 33 of the rules
and regulations. To date four volumes of publicly recorded continuing guaranties have
been placed of record.
Enforcement.--In the enforcement of this statute the Commission has, in general,
employed its usual procedure, long established and repeatedly sanctioned by the
courts, which is primarily preventive rather than punitive. Under the terms of the act
and the rules of the Commission there is assured fair and impartial treatment, with full
opportunity for hearing and court review.
Administrative compliance work involves inspection, examination, and correction
of labeling practices of specific concerns. During the fiscal year, several thousand of
such compliance matters involving

WOOL PRODUCTS LABELING ACT

77

consideration of the labeling of respective Concerns received attention and, where
correction appeared required, necessary steps were taken to effect complete
compliance with the act and the regulations.
Cooperation displayed generally in support of the requirements by concerns subject
to the act was highly gratifying. In the great majority of corrective instances thus far
concluded, the necessary remedial action was brought about through voluntary effort
without the need of resorting to compulsory action to protect the public interest. The
work so far has uncovered relatively few cases in which such voluntary action has not
been sufficient to effect correction and where it was necessary to invoke mandatory
relief.
Other duties covered in the administration of the statute during the fiscal year
concerned consideration and disposition of a large number of questions respecting
interpretation and statutory construction; also questions arising through the Bureau of
Customs relating to the clearance of importation of wool products for sale within this
country; and consideration and disposition of applications for rulings in cases of wool
products having, or claimed to have, inconsequential or insignificant textile content
under the provisions of section 4 (d).

PART V. RADIO AND PERIODICAL ADVERTISING
SPECIAL PROCEDURE PROVIDES CONTINUOUS SURVEY OF PUBLISHED
AND
BROADCAST MATTER

The Commission maintains its Radio and Periodical Division to provide a direct and
expeditious handling of certain cases involving false and misleading advertising,
violative of the provisions of the Federal Trade Commission Act.
Advertisers, publishers, broadcasting stations, and advertising agencies are accorded
the privilege of dealing directly with the Director of the Division, with a view to
reaching an agreement in such cases as are appropriate for negotiating a stipulation,
thereby disposing of the issues involved and obviating the necessity of formal trial.
The survey of advertising was inaugurated by the Commission in 1929 and was
limited to advertising appearing in magazines and newspapers. Expanded in 1934 to
cover commercial continuities broadcast by radio, the survey since 1939 also has
included mail order catalogs, almanacs, and foreign language newspapers. Questioned
advertisements noted in these surveys form the bases of prospective cases not
previously investigated and also provide a means of determining whether advertisers
who have been ordered by, or have stipulated with, the Commission to discontinue
false and misleading representations are complying with such orders or stipulations.
In eases where the advertising is determined by the Commission to be false or
misleading and circumstances so warrant ‘ the advertisers are extended the privilege
of disposing of the matters through an informal procedure, more fully explained on
page 117, which permits their executing stipulations to cease and desist from the use
of the acts and practices involved. A large majority of the cases are adjusted in this
manner.
In certain cases involving drugs, devices, and cosmetics, the Commission negotiates
stipulations inhibiting the publication of advertisements which do not disclose the
possible harmful effects which may be experienced from the use of the products. In
lieu. of the publication in the advertising of a full statement of such harmful effects,
these stipulations permit the publication of the statement, “Caution: Use Only As
Directed,” if and when the directions for use which appear on the label or in the
labeling carry an adequate
79

80

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

disclosure of the possible harm. This applies only to products that are potentially
dangerous and not to those inherently dangerous or where injury is probable.
Stipulations are negotiated with advertising agencies which. have prepared or
participated in the preparation of advertisements for food, drugs, devices, or cosmetics,
as well as with the advertisers on whose behalf the agencies acted.
In this phase of its activity, the Commission’s only object is to prevent false and
misleading advertisements. It does not undertake to dictate what an advertiser shall
say, but merely indicates what he may not say under the law. The Commission believes
its work in this field contributes substantially to the improvement that has been evident
in recent years in the character of all advertising.
Newspaper and magazine advertising.--In examining advertisements in current
publications, it has been found advisable to call for some newspapers and magazines
on a continuous basis, due to the persistently questionable character of the
advertisements published. However, as to publications generally, of which there are
some 21,500, it is physically impossible to survey continuously all advertisements of
a doubtful nature; also, it has been found unnecessary to examine all the issues of
publications of recognized high ethical standard whose publishers carefully censor all
copy before acceptance.
Generally, copies of current magazines and newspapers are procured on ft staggered
monthly basis, at an average rate of three times yearly for each publication, the
frequency of the calls for each publication depending upon its circulation and the
character of its advertisements.
Through such systematic calls during this fiscal year ended June 30, 1942, the
Commission procured 2,231 editions of representative newspapers of established
general circulation and 1,706 editions of magazines and farm and trade journals of
interstate distribution representing a combined reported circulation of 129,991,631.
Among these periodicals were included 258 issues of farm journals having a
combined circulation of 17,638,036; 168 issues of trade journals and specialty
publications with a combined circulation of 2,539,704; and 78 issues of foreignlanguage publications having a combined circulation of 1,891,890.
In these newspapers, magazines, and farm and trade journals, 362,827
advertisements were examined, of which 18,221 were noted as containing
representations that appeared to be false or misleading.
Almanac advertising.--The Commission examines almanacs of wide distribution
which are used as advertising media by distributors of drugs, devices, and other
commodities sold for the treatment of various ailments. This survey during the fiscal
year covered the examination of 1,768 advertisements, 392 being set aside as
warranting further investigation.

RADIO AND PERIODICAL ADVERTISING

81

Mail-order advertising.--During the fiscal year the Commission procured mail-order
catalogs and circulars containing an aggregate of 10,858 pages, examination of which
resulted in 399 advertisements being marked as containing possibly false and
misleading representations. Of the 69 mail-order houses included in the survey, 5 had
combined annual sales in excess of $1,640,474,632.
Radio advertising.--The Commission, in its systematic review of radio advertising,
issues calls to individual radio stations, generally at the rate of four times yearly for
each station. National and regional networks respond on a continuous weekly basis,
submitting copies of commercial continuities for all programs wherein linked hook-ups
are used involving two or more stations. Producers of electrical transcription
recordings each month submit typed copies of the commercial portions of all
recordings produced by them for radio broadcast. This material is supplemented by
periodic reports from individual stations listing the programs of recorded commercial
transcriptions and other data.
During the fiscal year the Commission received copies of 1,053,875 commercial
radio broadcast continuities and examined 1,001,450 such continuities. The
continuities received amounted to 2,032, ,417 pages of typewritten script and those
examined totaled 1,912,725 pages, consisting of 483,000 pages of network script,
1,416,606 pages of individual station script, and 13,119 pages of script representing
the built-in commercial portions of transcription recording productions destined for
radio broadcast through distribution of multiple pressings of such recordings to
individual stations. An average of 6,230 pages of radio script was read each working
day. From this material, 17,925 commercial broadcasts were marked for further study
as containing representations that might be false or misleading.
Cooperation of radio and publishing industries.--In general, the Commission has
received the cooperation of the 3 Nation-wide network chains, 20 regional network
groups, and transcription producers engaged in preparing commercial radio recordings,
in addition to that of 841 commercial radio stations, 491 newspaper publishers, and
535 publishers of magazines, farm journals, and trade publications, and has observed
a desire on the part of these broadcasters and publishers to aid in the elimination of
false and misleading advertising.
Sources of radio and periodical cases.--During the fiscal year, 86.5 percent of the
radio and periodical cases resulted from the route survey of advertising material as
described above and 13.5 percent resulted from complaints by or information received
from other Government agencies, competitors, and other members of the public.
Analysis of questioned advertising.--An analysis of the questioned advertisements,
which were assembled by cases and given legal review,

82

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

discloses that they pertained to 2,638 commodities in the proportions indicated below:
CLASSIFICATION OF PRODUCTS
Commodity
Food, drugs, devices, and cosmetics:
Food (human)
Food (animal)
Drugs
Cosmetics
Devices

Percent
10.6
2.9
44.3
15.4
2.4
75. 6

Other products:
Specialty and novelty goods
Automobile, radio, refrigerator, and other equipment
Home study courses
Tobacco products
Gasoline and lubricants
Poultry and livestock supplies and equipment
Miscellaneous, including apparel, fuels, house furnishings, and building materials
Total

5.4
1.3
1.6
1.0
.9
.2
14.0
24.4
100.0

Number of eases handled.--The Commission during the fiscal year ‘sent
questionnaires to advertisers in 432, cases and to advertising agencies in 36 cases, and
accepted 219 stipulations involving radio and periodical advertising, of which 27 were
amended, substitute or supplemental stipulations.
A total of 451 cases was disposed of by the various methods of procedure. Of this
number, 207 cases were considered settled upon receipt of reports showing compliance
with previously negotiated stipulations. In 17 cases the Commission waived
compliance reports. Of the remaining 227 cases, 208 were closed without prejudice to
the right of the Commission to reopen if warranted by the facts: 99 of them for lack of
jurisdiction or lack of evidence sufficient to establish a violation of law, 94 because
of discontinued business and practices or insufficient public interest, 15 because
corrective action by the Post Office Department made further action by the
Commission unnecessary, and 19 supplemental investigations were filed without
action for various reasons.
In addition, the Commission in 42 cases directed issuance of complaints, 31 because
advertisers failed to stipulate and 11 because of violations of previous stipulations.
Field investigations were ordered in 28 cases.
Seven hundred seventy-nine radio and periodical cases were pending on July 1,
1941, as against 726 on June 30, 1942.

RADIO AND PERIODICAL ADVERTISING

83

Procedure in advertising cases.--If it appears to the Commission that a published or
broadcast advertisement may be misleading, a questionnaire is sent to the advertiser
and request is made for a sample of the product advertised, if this is practicable, and
the quantitative formula, if the product is a compound. Copies of all advertisements
published or commercial continuities broadcast during a specific period are also
requested, together with copies of all booklets, folders, circulars, form letters, and
other advertising literature used.
Upon receipt of these data, the sample and formula are referred to the Medical
Advisory Division of the Commission or to an appropriate technical agency of the
Government for a scientific opinion. Upon receipt of the opinion, a list of such claims
as then appear to be false or misleading is sent to the advertiser, with pertinent portions
of the opinion. The advertiser is extended the privilege of submitting evidence in
support of his claims. He may answer by letter or, upon request, may confer with the
Radio and Periodical Division in person or through counsel.
If, after a consideration of all available evidence at hand, including that furnished
by the advertiser, the questioned claims appear to be justified, the division reports the
matter to the Commission with the recommendation that the case be closed. If it
appears from the weight of the evidence that the advertising is false or misleading, the
matter is referred to the Commission with recommendation either that complaint issue
or that the case be stipulated, provided it is one appropriate for stipulation procedure
and the advertiser desires to dispose of it by such voluntary agreement to cease and
desist from the use of the acts. and practices involved.
If the Commission so authorizes, a stipulation is prepared and forwarded to the
advertiser for execution. Should he object to any of its provisions, he may discuss
them by mail or in person. If and when he agrees to the terms of the stipulation and
signs and returns it, the matter is again reported to the Commission with
recommendation that the stipulation be accepted and the case closed without prejudice
to the right of the Commission to reopen the matter at any time the facts so warrant.
If the Commission accepts and approves the stipulation, the advertiser is required to
submit within 60 days from the date of acceptance a report in writing showing the
manner and form in which he is complying with the provisions of his agreement.

PART VI. MEDICAL ADVISORY DIVISION
FURNISHES MEDICAL AND SCIENTIFIC OPINIONS IN CASES INVOLVING
ADVERTISEMENT OF FOOD, DRUGS, DEVICES, AND COSMETICS

The Medical Advisory Division provides scientific information and opinions with
respect to the medical sciences in connection with cases before the Commission. The
most important phase of this work is supplying opinions in matters involving the
validity of advertising claims made for food, drugs, devices, and cosmetics. A
substantial part of the division’s work is devoted to assisting the Commission’s legal
staff at hearings in which the nature of the scientific problems involved makes
technical help necessary.
During the fiscal year, an experienced biochemist was appointed by the Commission
and assigned to the division to facilitate the handling of chemical and nutritional
problems.
Because of the extensive and direct influence of advertising on the public health,
many outstanding experts in the medical sciences are interested in the advertising
claims made for food, drugs, devices, and cosmetics, and they frequently serve without
compensation as expert witnesses at Commission hearings, their testimony being
essential to a determination of the facts.
Through its Medical Advisory Division, the Commission maintains contact with
other Government agencies concerned with food, drugs, devices, and cosmetics. These
include the Food and Drug Administration, the National Bureau of Standards, the
United States Public Health Service, the Bureau of Animal Industry, and the
Agricultural Marketing Administration.
The division’s responsibilities in connection with the Commission’s wartime
activities are discussed on page 24.
85

PART VII. FOREIGN TRADE WORK
ADVANTAGES OF ORGANIZATION UNDER EXPORT TRADE ACT

Foreign trade work of the Commission includes administration of the Export Trade
Act (Webb-Pomerene law) and inquiries conducted under section 6 (h) of the Federal
Trade Commission Act.
The Export Trade Act, in operation since 1918, provides for the organization of
export associations or cooperative groups engaged solely in export trade and requires
them to file with the Commission copies of their organization papers and agreements,
annual reports, and such other information as the Commission shall require concerning
their operation.
Associations report that a Webb law organization is particularly valuable when
conditions throughout the world are changing as rapidly as they are today. A central
organization trained to follow world events can judge far more quickly the possibility
of selling American products in countries which have been cut off by the war from
their former sources of supply than can individual producers engrossed chiefly in their
own production and domestic market problems. By acting for a number of members,
the association may make arrangements for supplying such markets and filling orders
that individual producers are not equipped to handle. Economies are effected by
centralized selling, and it is possible to divide large orders among the various member
companies in accordance with their ability to ship the goods. Operation as an
association also has facilitated speedy negotiation of export permits and navicerts, as
well as arrangements for ocean tonnage. Efficient pooling of shipments has prevented
delays en route and at seaport.
FORTY-NINE ASSOCIATIONS OPERATE UNDER THE ACT

During the fiscal year, 8 new associations were formed,1 bringing to 49 the number
on file with the Commission as of June 30, 1942. The associations on file, comprising
about 500 member companies whose total exports in 1941 had an approximate value
of $240,000,000, are:
American Box Shook Export Association, 308 Barr Building, Washington,
D. C.

American Hardwood Exporters, Inc.,
602 Carondelet Building, New Orleans.

2 Scrap Export Associates, Inc., filed in September 1941 but later withdrew from operation because of
conditions due to the war.

87

88

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

American Provisions Export Co., 80
East Jackson Boulevard, Chicago.
American Pulp Export Corporation, C/O
Philip S. Ehrlich, 2002 Russ Building,
San Francisco.’
American Soda Pulp Export Association, 230 Park Avenue, New York
American Spring Manufacturers Export
Association, 30 Church Street, New
York.
American Tire Manufacturers Export
Association, 30 Church Street, New
York.
California Alkali Export Association,
609 South Grand Avenue, Los Angeles.
California Dried Fruit Export Association, 1 Drumm Street, San Francisco.
California Prune Export Association, 1
Drumm Street, San Francisco.
California Raisin Export Association,
1 Drumm Street, San Francisco.
Carbon Black Export, Inc., 500 5th Avenue, New York.
Cement Export Co., Inc., The, c/o M. S.
Ackerman, Treasurer, 150 Broadway,
New York.
Copper Exporters, Inc., 50 Broadway,
New York.
Douglas Fir Export Co., 530 Henry
Building, Seattle.
Durex Abrasives Corporation, 63 Wall
Street, New York.
Easco Lumber Association, 216 Pine
Street, San Francisco.2
Electrical Apparatus Export Association, 70 Pine Street, New York.Electrical Export Corporation, 122 East
51st Street, New York.
Export Screw Association of the United
States, 23 Acorn Street, Providence,
R.I.
Flints Export Agency, 46 Center Street,
Newark, N. J.
Florida Hard Rock Phosphate Export
Association, 1403 Savannah Bank &
Trust Building, Savannah, Ga.
2

Formed during the fiscal year.

General Milk Co., Inc., 19 Rector Street,
New York.
Goodyear Tire & Rubber Export Co.,
The, 1144 East Market Street, Akron,
Ohio.
Metal Lath Export Association, The,
55 West 42d Street, New York.
Northwest Dried Fruit Export Association, 303 Title & Trust Building,
Portland, Oreg.
Pacific Forest Industries, Washington
Building, Tacoma, Wash.
Pacific Fresh, Fruit Export Association,
333 Pine Street, San Francisco.
Pencil Industry Export Association, 37
Greenpoint Avenue, Brooklyn.
Phosphate Export Association, 393 Seventh Avenue, New York.
Pipe Fittings & Valve Export Association, The, 1421 Chestnut Street, Philadehphia.
Plate Glass Export Corporation, 2000
Grant Building, Pittsburgh.
Potash Export Association, Inc., c/o Maj.
Fred N. Oliver, Secretary, 110 East
42d Street, New York.
Redwood Export Co., 405 Montgomery
Street, San Francisco.
Rice Export Association, 1103 Queen &
Crescent Building, New Orleans.
Rubber Export Association, The, 19
Goodyear Avenue, Akron, Ohio.
Signal Export Association, 420 Lexington Avenue, New York.
Steel Export Association of America,
Inc., 75 West Street, New York.
Sulphur Export Corporation, 420 Lexington Avenue, New York.Textile Export Association of’ the
United States, 40 Worth. Street, New
York.
Typewriter Manufacturers Export Association, 1611 44th Street NW.,
Washington, D. C.
United States Alkali Export Association, Inc., 11 Broadway, New York.
United States Export Wallboard As
sociation, 55 West 42d Street, New
York.2

FOREIGN TRADE WORK
United States Insulation Board Export
Association, 55 West 42d Street, New
York.2
Walnut Export Sales Co., Inc., 12th
Street & Kaw River, Kansas City,
Kans.
Walworth International Co., 60 East
42d Street, New York.

89

Washington Evaporated Apple Export
Association, 709 North First Avenue,
Yakima, Wash.
Wesco Lumber Association, 2 Pine
Street, San Francisco.2
Wine and Brandy Export Association
of California, 85 2d Street, San Francisco.2

REGULATION OF TRADE AND INDUSTRY ABROAD

Under the authority granted in section 6 (h) of the Federal Trade Commission Act,
the Commission follows developments in trust laws and regulation of competition
abroad. Foreign measures for regulation of trade and industry during the fiscal year
have been largely in the form of wartime or defense acts, some of which are briefly
noted for the following countries or dominions:
Algeria.--A broad program was authorized in an order dated April 7, 1941, for
creation of an organization committee in each branch of industrial and commercial
activity to order programs of production, manufacture and trade, plan for purchase and
distribution of goods, regulate the activity of enterprises, propose prices, and improve
working conditions.
Argentina.--Strict enforcement of the Anti-Speculation Law of 1939 was ordered in
1942, involving heavy fines for quoting prices on food, clothing, and housing in excess
of the Government fixed maximum. The Government purchased the entire crops of
wheat, corn, cotton, flaxseed, rice, and sunflower seed, which were to be marketed by
the Grain Board.
Australia.--After war began in the Pacific, drastic steps were taken to put Australia
on a total war basis. Regulations on February 20, 1942, and thereafter, include control
of manpower, prices, interest, and profits; ban on sale of property; stabilization of
wages; and control of manufacture to insure production of essentials. Wages, prices
and services were pegged at levels obtaining on February 10, 1942.
Belgian Congo.--Under a Price-Fixing Ordinance effective in May 1941, profits
were to be limited and penalties imposed for causing abnormal increase or decrease
in domestic prices by fraudulent means. A list of items was named for which maximum
wholesale and retail prices were to be fixed.
Brazil.--An Export-Import Bureau was established by decree on May 21, 1941, to
promote exports and imports, lend financial assistance, and to purchase and store
products for exportation or imported products indispensable to the national economy.
A decree
2

Formed during the fiscal year.

90

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

law of June 30, 1941, reserved the rice supply for internal consumption, prohibited
exports, and authorized the National Economy Defense Commission to suppress illegal
speculations or monopoly in this product. A decree of September 18, 1941, created
a Regulating Board for the Orange Trade.
Bulgaria.--The Law on Fruit Growing, April 4, 1941, included provisions for
preservation of nut trees and prohibited their cutting. Under a law to ensure the supply
of commodities, a regulation in April 1941 established price control on leaf tobacco
under the Agricultural and Cooperative Bank.
Canada.--After more than 2, years of price fixing under the Wartime Prices and
Trade Act of 1939, “Maximum Prices Regulations” published in November 1941 fixed
an “over-all ceiling price,” requiring that manufacturers, importers, wholesalers, and
retailers must not sell, after December 1, 1941, at prices higher than the maximum
price charged for the same or similar products during a basic period, September 15 to
October 11, 1941. In order to relieve the so-called “squeeze” between the cost of raw
material and the retail selling price, subsidies may be given, under administration of
a Commodity Prices Stabilization Corporation. The ceiling applies to imports, with
provision for reduction in tariff or compensating subsidy; and to wage rates, with
provision for payment of a cost-of-living bonus if necessary. It does not apply to
exports or to prices paid to farmers, although it applies to agricultural products as sold
by dealers, processors and retail merchants. A Maximum Rentals Regulation froze
rents as of October 11,1941; and wages have been frozen since November 15, 1941,
by an order which placed extensive control of wages under the National War Labor
Board. Under the Combines Investigation Act, tobacco manufacturers and wholesalers
were convicted and fined in July 1941; and manufacturers of shipping containers, also
charged with illegal monopoly, were convicted and fined in February 1942.
Chile.--The Commissariat General of Subsistence and Prices issued decrees, in June
1941 insuring priority of transport for articles of prime necessity.
Cuba.--Emergency legislation in December 1941 and January 1942 included a Law
of Production and Supply authorizing regulation of commerce, industry, and
production of agricultural and mining products, the fixing of prices, and expropriation
if necessary for the national welfare and maintenance of defense. A decree of May 13,
1942, provided for an Office of Price Regulation and Supply, and some prices were
fixed at the levels of March 1942.
Dominican Republic.--Under decrees on May 18 and June 2, 1942, a Rice
Comptroller was appointed and a Commission for Financing Rice Producers was
formed to promote and regulate the rice industry. The Minerals Act of March 27,
1942, restated the principle that all

FOREIGN TRADE WORK

91

subsoil rights belong to the State, and exploitation can be undertaken only on the basis
of concessions granted by the Government.
Ecuador.--Steps were taken in 1941 to control prices of foodstuffs, medical supplies,
and other articles of prime necessity.
Egypt.--A Price Control Board was established by proclamation of September 24,
1941, to inventory stocks, control imports and exports, fix prices, and control supplies.
Finland.--A law on May 6, 1941, extended Government price-fixing authority and
provided for regulation of production, consumption, trade, transportation, imports and
exports, prices, materials, fees and charges, and labor, with power to requisition goods
and property.
France.--All trade unions were abolished in October 1941, strikes and lockouts were
prohibited, and workers were required to join newly created “corporations” under
Government control.
Germany.--A Decree on the Guiding of Purchase Power, issued on October 30,
1941, provided for “plant equipment accounts” for business houses and “iron savings
accounts” for workers, into which a part of the income of firms and workers shall be
paid and frozen until after the war. No interest will be paid. Deductions are made by
the employer before wages are paid, to cover the wage tax, social insurance, and iron
savings. Further price control was provided in a decree by the Price Commissioner on
February 2, 1942, intended to equalize profits and eliminate firms unable to produce
at low cost.
Great Britain.--The Goods and Services (Price Control) Act passed on July 22,
1941, extended governmental authority under the Prices of Goods Act of 1939, to
include services, and amended price fixing provisions. The Location of Industry
(Restriction) Order, effective July 25, 1941, prohibited removal of a business from one
location to another without Government permission; and the Location of Retail
Businesses Order, 1941, effective January 1, 1942, prohibited opening of new shops
and sale in existing shops of goods not previously sold there. In 1942, the British
Board of Trade appointed a Central Committee of Export Groups to consider post war
plans, including some form of coordinated export trade planning among nations.
Guatemala.--An Anti-Monopoly Decree passed on April 24, 1942, prohibited
exclusive distribution or exclusive sales contracts by manufacturers, importers and
merchants. An Anti-Profiteering Decree, April 24, 1942, limited profits on imports to
the maximum percentage of profit made on each class of merchandise during the year
1939, with severe penalties for violation.
Mexico.--The Law of Chambers of Commerce published on August 26, 1941,
required all business men and industrialists to register and
492824--43----7

92

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

become members of Chambers of Commerce created to represent their members in
dealing with Government offices, act as consulting bodies for the State, serve as
arbitrators in business disputes, discharge the duties of a referee in bankruptcy, and
undertake other authorized functions. A decree published on February 6, 1942, created
an Office of Control and Supply to issue certificates of necessity for products subject
to allocation and licensing in the United States.
Netherlands.--A Commission for Economy in the Use of Raw materials was created
by Nazi authorities to ensue that Dutch industries work exclusively for the German
war machine.
Newfoundland.--Under the Defense (Prices of Goods) Regulations, 1941, and the
Food (Current Prices) Order, effective May 30, 1942, the sale or offering for sale of
a list of food products at prices exceeding those in effect on May 2, 1942, was
prohibited.
New Zealand.--Emergency measures included the fixing of prices on 38 essential
commodities, effective September 1, 1941.
Nicaragua.--Wide emergency powers granted to the President in 1939 were
continued and extended in 1941.
Norway.--As in other German occupied areas, a German Reich Commissioner was
appointed, this official declaring the King and Royal House deposed, the prior
Government abolished, and all political parties disbanded. Production and trade are
under German direction, employers and employees under rigid regulation, and labor
and youth service are at the service of the German Government. Foodstuffs, clothing,
mineral oils, and industrial supplies are strictly rationed.
Paraguay.--A decree on November 1, 1941, provided for local price control
commissioners, under the Bureau of Industry and Commerce, to fix maximum prices
on articles of “general necessity.”
Salvador.--A newly created Committee on Economic Coordination was given
authority to control industry and trade, and all branches of business, industry, and
agriculture were required to cooperate.
South Africa.--Under the War Measures Act, 1940, “controllers” were appointed in
1941 and 1942 to regulate production, sale and supplies in a number of industries.
Spain.--A National Institute for Industry was created by a law on September 25,
1941, to promote and finance the creation and development of Spanish industries;
Government-owned factories and all participation of the Government in industrial
enterprises were to be transferred to the Institute.
Sweden--Under a Price Regulation Law effective June 16,1941, superseding the Law
on Maximum Prices, 1939, the Government may now fix a “normal” price on “articles
of necessity,” which may not be exceeded without a permit. Trade in these products
may be lim-

FOREIGN TRADE WORK

93

ited to certain business firms that are organized into trade associations or that have
been trading in the products for a specified period of time The Government may
require sale of private stocks at fixed prices.
Switzerland.--Under the basic Law for Assurance of the Country’s Supply of
Essential Commodities, a number of War Economy Syndicates were formed to which
the Government transferred its functions pertaining to exports, imports, warehousing,
transportation, production, distribution, and utilization of goods. The syndicates are
usually in the form of cooperatives and operate under supervision and control of the
Federal Department of Economy.
Turkey.--War measures in 1941 extended Government control over practically all
branches of trade, industry, and agriculture, including fixing of prices and profits.
Uruguay.--The Price Control Law passed in 1939 was extended in 1941, and a
decree dated October 23, 1941, authorized the Executive to fix prices on articles of
prime necessity, for producers, wholesalers, middlemen, and retailers, taking into
consideration the cost of each article and allowing a reasonable margin of profit; and
to control the supply of such products, limit exports, regulate storage, and prevent
hoarding.

PART VIII. FISCAL AFFAIRS
APPROPRIATION ACT PROVIDING FUNDS FOR COMMISSION WORK

The Independent Offices Appropriation Act, 1942 (Public Law 28, 77th Congress),
approved April 5, 1941, provided funds for the fiscal year 1942 for the Federal Trade
Commission as follows:
FEDERAL TRADE COMMISSION
For five Commissioners, and for all other authorized expenditures of the Federal Trade
Commission in performing the duties imposed by law or in pursuance of law, Including secretary
to the Commission and other personal services, contract steno-graphic reporting services;
supplies and equipment, law books, books of reference, periodicals, garage rentals, traveling
expenses, including not to exceed $900 for expenses of attendance, when specifically authorized
by the Commission, at meetings concerned with the work of the Federal Trade Commission, for
newspapers not to exceed $500, foreign postage, and witness fees and mileage in accordance
with section 9 of the Federal Trade Commission Act; $2,300,000: Provided, That no part of the
funds appropriated herein for the Federal Trade Commission shall be expended upon any
Investigation hereafter provided by concurrent resolution of the Congress until funds are
appropriated subsequently to the enactment of such resolution to finance the cost of such
investigation.
For all printing and binding for the Federal Trade Commission, $60,000.
Total, Federal Trade Commission, $2,360,000.

APPROPRIATIONS FOR FISCAL YEAR
Appropriations available to the Commission for the fiscal year ended June 30, 1942,
under the Independent Offices Appropriation Act approved April 5, 1941, amounted
to $2,360,000. This sum is made up of three separate items: (1) $50,000 for salaries
of the Commissioners, (2) $2,250,000 for the general work of the Commission, and (3)
$60,000 for printing and binding.
WAR WORK
Expenditures by the Commission for studies connected with the war effort amounted
to a total of $340,694 during the fiscal year, of which amount $176,709 represented
expenditures by the Legal Division of the Commission and $163,985 represented
expenditures by the Division of Accounts, Statistics, and Economic Investigations.
95

96

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION
Appropriations, allotments, expenditures, liabilities, and balances for the fiscal year
ended June 30, 1942
Amount
available

Amount
expended

Liabili- Expendities
tures and
Balances
liabilities

Federal Trade Commission 1942-salaries, Commissioners and all
other authorized expenses
$2,300,000.00 $2,214,273.18 $47,133.81 $2,261,406.99 $38,593.01
Printing and binding, Federal
Trade Commission, 1942
60,000.00
6,898.11 35,101.89
42,000.00 18,000.00
Working fund, Federal Trade
Commission (emergency
management), 1942-43
73,822.00
32,402.56 3,111.58
35,514.14 38,307.86
Total fiscal year 1942
2,433,822.00 2,253,573.85 85,347.28 2,338,921.13 94,900.87
Unexpended balances:
Federal Trade Commission 1941 120,732.07 49,130.58
1,186.15
50,316.73 70,415.34
Printing and binding, Federal Trade
Commission 1941
44,578.13 35,759.61
7,818.52
43,578.13 1,006.60
Federal Trade Commission 1940
72,101.27 1,001.66
1,001.66 71,099.61
Federal Trade Commission 1939
1 20.60
1 20.60
1 20.60
Federal Trade Commission 1937
1.26
Total
2,671,214.13 2,339,445.10 94,351.95 2,433, 797. 05 237,417.08

1.26

1 Denotes red figures.

Detailed statement of costs for the fiscal year ending June 30, 1942
Salary
Commissioners
Office of the Secretary
Attorneys to Commissioners
Clerks to Commissioners
Messengers to Commissioners
Total
Administration:
Budget and Finance Section
Docket Section
Hospital
Information Service
Labor
Legal Research and Compiling
Library Section
Mail and Files Section
Messengers
Personnel Section
Publications Section
Stenographic Section.
Supply and Service Section
Communications
Contract Service
Equipment
Supplies
Transportation of things
Travel Expense
Total
Legal:
Applications for complaints
Complaints
Export trade
Preliminary Inquiries
Trade practice conferences
Total

Travel expense

$49,999.20
37,049.72
41,732.92
14,633.17
6,329.28
149,744.29

$101.41

101.41

18,302.43
48,776.52
1,921.86
16,956.78
3,360.77
12,811.08
20,864.85
17,824.39
17,707.67
15,950.83
47,963.13
105,171.49
18,068.72

347,733.08

113.10

295,073.70
607,793.30
8,342.42
140, 763.63
113,114.05
1,165,087.10

29,970.94
51,653.26
32.73
7,452.23
258.66
89,367.82

General investigations
Accounting methods and practices
306.31
Industrial corporation financial reports 79,249.60
490.02
Methods and costs of distribution
11,836.58
494.05
Motor vehicle investigation
218.36
Production cost accounting methods
894.99
Resale price maintenance investigation
(1939)
10,216.33

Other

Total
$50, 100.61
37,049.72
41,732.92
14,633.17
6,329.28
149,845.70

18,302.43
48,776.52
1,921.86
16,956.78
3,360.77
12,811.08
20,864.85
17,824.39
17,707.67
15,950.83
47,963.13
105,171.49
18,068.72
$13,054.86
13,054.86
4,324.54
4,324.54
38,865.34
38,865.34
24,444.06
24,444.06
539.75
539.75
113.10
113.10
81,228.55 429,074.73

11,202.14 336,246.78
7,415.86 666,862.42
8,375.15
393.18 148,600.54
19.50 113,392.21
19,010.68 1, 273,485.60

306.31
79,739.62
12,330.63
218.36
894.99
1 19.15

10,197.18

Total

102,722.17

964.92

103,687.09

97

FISCAL AFFAIRS

Detailed statement of Costs for the fiscal year ending June 30, 1942--Continued
Salary
War work
Printing and binding

Travel expense
$50,358.17

$290, 275. 22

Summary:
Commissioners and Secretary
Administration
General Investigation
Legal
Printing and binding
War work
Total

149.744.29
347,733.08
102,722.17
1,165,087.10
42,657.72
290,275.22
2,055,561.86

101.41
113.10
964.92
89,367.82
50,358.17
140,905.42

Other

Total

$60.87 $340,694.26
42,657.72
42,657.72

149,845.70
81,228.55 429,074.73
103,687.09
19,030.08 1,273,485.60
42,657.72
60.87 340,694.26
142,977.82 2,339,445.10

Recapitulation of costs by divisions
Commissioners and Secretary
Administrative
Chief Counsel
Chief Examiner
Accounts, Statistics, and Economic
Investigations
Medical Advisory
Radio and Periodical
Trade Practice Conferences
Trial Examiner
Total

$151,964.17
357,697.08
382,572.85
377,285.14

$101.41
113.10
30,185.57
44,533.85

122,691.86
22,718.60
139,361.70
99,084.68
111,910.56
1,765, 286.64

$152,065.58
$81, 228.55 439,038.73
16,830.36 429, 588.78
1,756.43 423,575.42

964.92
1,163.75

123,656.78
162.00
24,044.35
18.39
139,380.09
255.50
4.75
99,344.93
13,229.15
258.75 125,398.46
90,547.25
100,259.23 1,956,093.12

1 Denotes red figures.

APPROPRIATIONS AND EXPENDITURES, 1915-42
Appropriations available to the Commission since its organization and expenditures
for the same period, together with the unexpended balances, are:
Year

1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927

Nature of appropriations

Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding
Lump sum

Appropriations
Expenditures
and liabilities
$184,016.23
12,386.76
430,964.08
15,000.00
542,025.92
25,000.00
1,578,865.92
30,000.00
1,693,622.18
14,934.21
1,206, 587.42
28,348.97
938,609.94
37,182.56
952,505.45
22,801.73
952,020.11
22,460.21
990,000.00
20,000.00
990,000.00
20,000.00
990,000.00
18,000.00
980,000.00

$90,442.05
9,504.10
379,927.41
14,997.55
448,890.66
23,610.54
1,412,280.19
11,114.06
1,491,637.39
14,934.21
1,007,593.30
28,348.97
842,991.24
37,182.56
878,120.24
22,801.73
948,293.07
22,400.21
900,020.93
19,419.25
988,082.37
19,866.14
976,957.02
18,000.00
943,881.99

Balance
$93,574.18
2,882.60
51,636.67
2.45
93,135.26
1,389.48
166,585.73
18,885.94
201,984.97
0
198,994.12
0
95,618.70
0
74,385.21
0
3,727.04
0
29,979.07
580.75
1,917.63
133.86
13,042.98
0
36,118.01

1928
1929

98
Year

Printing and binding
Lump sum
Printing and binding
Lump sum
Printing and binding

17,000.00
967,850.00
16,500.00
1,135,414.83
27,777.69

17,000.00
951,965.15
16,500.90
1,131,521.47
27,777.69

0
15,884.85
0
3,893.36
0

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION
Nature of appropriations

1930
Lump sum
10,887.65
Printing and binding
1931
Lump sum
124,454.46
Printing and binding
1932
Lump sum
58,612.59
Printing and binding
1933
Lump sum
42,741.56
Printing and binding
10,000.00
1934
Lump sum
Printing and binding
1935
Lump sum
141,084.67
Printing and binding
1936
Lump sum
209,935.82
Printing and binding
3,803.95
1937
Lump sum
44,898.12
Printing and binding
1938
Lump sum
Printing and binding
1939
Lump sum
Printing and binding
1940
Lump sum
70,610.93
Printing and binding
1941
Lump sum
72,743.76
Printing and binding
1,000.00
1942
Lump sum
76,900.87
Printing and binding
18,000.00

Appropriations
and liabilities

Expenditures
Balance

1,440,971.82

1,430,084.17

35,363.58
1,932,857.81

35,363.58
1,808,463.35

0

39,858.73
1,808,097.19

39, 858.73
1,749,484.00

0

30,000.00
1,421,714.70

30,000.00
1,378,973.14

30,000.00

20,000.00

1,273,763.49
40,250.00
2,063,398.01

1,273,006.38
40,250.00
1,922,313.34

1 71
5.1
0

34,000.00
1,998,665.58

34,000.00
1,788,729.76

0

36,800.00

32,996.05

1,895,571.94

1,850,673.82

43,353.95
1,950,000.00
46,000.00
2,236,795.00
46,700.00
2,285,500.00

43,353.95
1,895,519.47
46,000.00
2,150,474.40
46,709.00
2,214,889.07

60,000.00
2,240,000.00

60,000.00
2,167,256.24

60,000.00

59,000.00

2,373,822.00
60,000.00

2,296,921.13
42,000.00

0
54,480.35
0
86,320.60
0

0

APPENDIXES
FEDERAL TRADE COMMISSION
(15 U.S. C., Secs. 41-58)
AN ACT To create a Federal Trade Commission, to define Its powers and duties,
and for
other purposes
Sec. 1. Be it enacted by the Senate and House of Representatives of the United States
of America in Congress assembled, That a commission is hereby created and
established, to be known as the Federal Trade Commission (hereinafter referred to as
the Commission) , which shall be composed of five commissioners, who shall be
appointed by the President, by and with the advice and consent of the Senate. Not
more than three of the commissioners shall be members of the same political party.
The first commissioners appointed shall continue in office for terms of three, four,
five, six, and seven years, respectively, from the date of the taking effect of this Act,
the term of each to be designated by the President, but their successors shall be
appointed for terms of seven years, except that any person chosen to fill a vacancy
shall be appointed only for the unexpired term of the commissioner whom he shall
succeed : Provided, however, That upon the expiration of his term of office a
commissioner shall continue to serve until his successor shall have been appointed and
shall have qualified. The Commission shall choose a chairman from Its own
membership. No commissioner shall engage in any other business, vocation, or
employment. Any commissioner may be removed by the President for Inefficiency,
neglect of duty, or malfeasance in office. A vacancy in the Commission shall not
impair the right of the remaining commissioners to exercise all the powers of the
Commission.
The Commission shall have an official seal, which shall be judicially noticed.
SEC. 2. That each commissioner shall receive a salary of $10,000 a year, payable in
the same manner as the salaries of the judges of the courts of the United States. The
commission shall appoint secretary who shall receive a salary of $5,000 a year, 1
payable in like manner, and it shall have authority to employ and fix the compensation
of such attorneys, special experts, examiners, clerks, and other employees as it may
from time to time find necessary for the proper performance of its duties and as may
be from time to time appropriated for by Congress.
With the exception of the secretary, a clerk to each commissioner, the attorneys, and
such special experts and examiners as the Commission may from time to time find
necessary for the conduct of its work, all employees of the commission shall be a part
of the classified civil service, and shall enter the service under such rules and
regulations as may be prescribed by the Commission and by the Civil Service
Commission.
All of the expenses of the Commission, including all necessary expenses for
transportation incurred by the commissioners or by their employees under their orders,

in making any investigation, or upon official business in any other places than in the
city of Washington, shall be allowed and paid on the presentation of itemized vouchers
therefor approved by the Commission.
Until otherwise provided by law, the commission may rent suitable offices for its
use.
The Auditor for the State and Other Departments shall receive and examine all
accounts of expenditures of the Commission. 2
1 The salary of the secretary is controlled by the provisions of the Classification Act
of 1923, approved March 4, 1923, 42 Stat. 1488.
2 Auditing of accounts was made a duty of the General Accounting Office by the Act
of June 10, 1921, 42 Stat. 24.

99

100

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

SEC. 3. That upon the organization of the Commission and election of its chairman,
the Bureau of Corporations and the offices of Commissioner and Deputy
Commissioner of Corporations shall cease to exist; and all pending investigations and
proceedings of the Bureau of Corporations shall be continued by the Commission.
All clerks and employees of the said bureau shall be transferred to and become
clerks and employees of the Commission at their present grades and salaries. All
records, papers, and property of the said bureau shall become records, papers, and
property of the Commission, and all unexpended funds and appropriations for the use
and maintenance of the said bureau, including any allotment already made to it by the
Secretary of Commerce from the contingent appropriation for the Department of
Commerce for the fiscal year nineteen hundred and fifteen, or from the departmental
printing fund for the fiscal year nineteen hundred and fifteen, shall become funds and
appropriations available to be expended by the Commission in the exercise of the
powers, authority, and duties conferred on it by this Act.
The principal office of the Commission shall be in the city of Washington, but it may
meet and exercise all Its powers at any other place. The Commission may, by one or
more of its members, or by such examiners as it may designate, prosecute any inquiry
necessary to its duties in any part of the United States.
SEC. 4. The words defined in this section shall have the following meaning when
found in this Act, to wit:
“Commerce” means commerce among the several States or with foreign nations, or
in any Territory of the United States or in the District of Columbia, or between any
such Territory and another, or between any such Territory and any State or foreign
nation, or between the District of Columbia and any State or Territory or foreign
nation.
“Corporation” shall be deemed to Include any company, trust, so-called Massachusetts trust, or association, incorporated or unincorporated, which is organized to
carry on business for its own profit or that of its members, and has shares of capital or
capital stock or certificates of interest, and any company, trust, so-called
Massachusetts trust, or association, incorporated or unincorporated, without shares of
capital or capital stock or certificates of interest, except partnerships, which Is
organized to carry on business for its own profit or that of its members.
“Documentary evidence” includes all documents, papers, correspondence, books of

account, and financial and corporate records.
“Acts to regulate commerce” means the Act entitled “An Act to regulate commerce,”
approved February 14, 1887, and all Acts amendatory thereof and supplementary
thereto and the Communications Act of 1934 and all Acts amendatory thereof and
supplementary thereto.
“Antitrust Acts” means the Act entitled “An Act to protect trade and commerce
against unlawful restraints and monopolies,” approved July 2, 1890; also sections 73
to 77, inclusive, of an Act entitled “An Act to reduce taxation, to provide revenue for
the Government, and for other purposes,” approved August 27, 1894; also the Act
entitled “An Act to amend sections 73 and 76 of the Act of August 27, 1894, entitled
‘An Act to reduce taxation, to provide revenue for the Government, and for other
purposes,’” approved February 12, 1913; and also the Act entitled “An Act to
supplement existing laws against unlawful restraints and monopolies, and for other
purposes,” approved October 15, 1914.
Sec. 5. (a) Unfair methods of competition in commerce, and unfair or deceptive acts
or practices in commerce, are hereby declared unlawful.
The Commission Is hereby empowered and directed to prevent persons, partnerships,
or corporations, except banks, common carriers, subject to the Acts to regulate
commerce, air carriers and foreign air carriers subject to the Civil Aeronautics Act of
1938, 3 and persons, partnerships, or corporations subject to the Packers and
Stockyards Act, 1921, except as provided in section 406 (b) of said Act, from using
unfair methods of competition in commerce and unfair or deceptive acts or practices
in commerce.
(b) Whenever the Commission shall have reason to believe that any such person,
partnership, or corporation has been or is using any unfair method of com3 By subsection (f), Section 1107 of the “Civil Aeronautics Act of 1938,” approved June 23, 1938,
Public No.706, 75th Congress, Ch. 601, 3d Sess., S. 3845, 52 Stat. 1028, Section 5 (a) of the Federal
Trade Commission Act was amended by inserting before the words "and persons” (and following the
words “to regulate commerce”), the following: “air carriers and foreign air carriers subject to the Civil
Aeronautics Act of 1918.”

FEDERAL TRADE COMMISSION ACT

101

petition or unfair or deceptive act or practice in commerce, and if it shall appear to the
Commission that a proceeding by it in respect thereof would be to the interest of the
public, it shall issue and serve upon such person, partnership, or corporation a
complaint stating Its charges in that respect and containing a notice of a hearing upon
a day and at a place therein fixed at least thirty days after the service of said complaint.
The person, partnership, or corporation so complained of shall have the right to appear
at the place and time so fixed and show cause why an order should not be entered by
the Commission requiring such person, partnership, or corporation to cease and desist
from the violation of the law so charged in said complaint. Any person, partnership,
or corporation may make application, and upon good cause shown may be allowed by
the Commission to intervene and appear In said proceeding by counsel or in person.
The testimony In any such proceeding shall be reduced to writing and filed in the
office of the Commission. If upon such hearing the Commission shall be of the opinion
that the method of competition or the act or practice in question is prohibited by this
Act, it shall make a report in writing in which It shall state Its findings as to the facts
and shall issue and cause to be served on such person, partnership, or corporation an
order requiring such person, partnership, or corporation to cease and desist from using
such method of competition or such act or practice. Until the expiration of the time
allowed for filing a petition for review, if no such petition has been duly filed within
such time, or, if a petition for review has been filed within such time then until the
transcript of the record in the proceeding has been filed in a circuit court of appeals of
the United States, as hereinafter provided, the Commission may at any time, upon such
notice and in such manner as it shall deem proper, modify or set aside, in whole or in
part, any report or any order made or issued by it under this section. After the
expiration of the time allowed for filing a petition for review, if no such petition has
been duly filed within such time, the Commission may at any time, after notice and
opportunity for bearing, reopen and alter, modify, or set aside, in whole or in part, any
report or order made or issued by it under this section, whenever In the opinion of the
Commission conditions of fact or of law have so changed as to require such action or
if the public interest shall so require :
Provided, however, That the said person, partnership, or corporation may, within
sixty days after service upon him or it of said report or order entered after such a
reopening, obtain a review thereof in the appropriate circuit court of appeals of the
United States, in the manner provided in subsection (c) of this section.
(c) Any person, partnership, or corporation required by an order of the Commission
to cease and desist from using any method of competition or act or practice may obtain
a review of such order in the circuit court of appeals of the United States, within any
circuit where the method of competition or the act or practice in question was used or
where such person, partnership, or corporation resides or carries on business, by filing
in the court, within sixty days 4 from the date of the service of such order, a written
petition praying that the order of the Commission be set aside. A copy of such petition
shall be forthwith served upon the Commission, and thereupon the Commission
forthwith shall certify and file in the court a transcript of the entire record in the
proceeding, including all the evidence taken and the report and order of the
Commission. Upon such filing of the petition and transcript the court shall have
jurisdiction of the proceeding and of the question determined therein, and shall have
power to make and enter upon the pleadings, evidence, and proceedings set forth in

such transcript a decree affirming, modifying, or setting aside the order of the
Commission, and enforcing the same to the extent that such order is affirmed, and to
issue such writs as are ancillary to its jurisdiction or are necessary in its judgment to
prevent injury to the public or to competitors pendente lite. The findings of the
Commission as to the facts, if supported by evidence, shall be conclusive. To the
extent that the order of the Commission is affirmed, the court shall thereupon issue its
own order commanding obedience to the terms of such order of the Commission. If
either party shall apply to the court for leave to adduce additional evidence, and shall
show to the satisfaction of the court that such additional evidence is material and that
there were reasonable grounds for the failure to adduce such evidence in the
proceeding before the Commission, the court may
4 Section 5 (a) of the amending Act of 1938 provides :
SEC. 5. (a) In case of an order by the Federal Trade Commission to cease and desist, served on or
before the date of enactment of this Act, the sixty-day period referred to In section 5 (c) of the Federal
Trade Commission Act, as amended by this Act, shall begin on the date of the enactment of this Act.

102

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

order such additional evidence to be taken before the Commission and to be adduced
upon the hearing in such manner and upon such terms and conditions as to the court
may seem proper. The Commission may modify its findings as to the facts, or make
new findings, by reason of the additional evidence so taken, and it shall file such
modified or new findings, which, if supported by evidence, shall be conclusive, and
its recommendation, if any, for the modification or setting aside of its original order,
with the return of such additional evidence. The judgment and decree of the court shall
be final, except that the same shall be subject to review by the Supreme Court upon
certiorari, as provided in section 240 of the Judicial Code.
(d) The jurisdiction of the circuit court of appeals of the United States to affirm,
enforce, modify, or set aside orders of the Commission shall be exclusive.
(e) Such proceedings in the circuit court of appeals shall be given precedence over
other cases pending therein, and shall be in every way expedited. No order of the
Commission or judgment of court to enforce the same shall in any wise relieve or
absolve any person, partnership, or corporation from any liability under the Antitrust
Acts.
(f) Complaints, orders, and other processes of the Commission under this section
may be served by anyone duly authorized by the Commission, either (a) by delivering
a copy thereof to the person to be served, or to a member of the partnership to be
served, or the president, secretary, or other executive officer or a director of the
corporation to be served; or (b) by leaving a copy thereof at the residence or the
principal office or place of business of such person, partnership, or corporation; or (c)
by registering; and mailing a copy thereof addressed to such person, partnership, or
corporation at his or its residence or principal office or place of business. The verified
return by the person so serving said complaint, order, or other process setting forth the
manner of said service shall be proof of the same, and the return post office receipt for
said complaint, order, or other process registered and mailed as aforesaid shall be
proof of the service of the same.
(g) An order of the Commission to cease and desist shall become final-(1) Upon the expiration of the time allowed for filing a petition for review, if no
such petition has been duly filed within such time; but the Commission may thereafter
modify or set aside its order to the extent provided in the last sentence of subsection
(b) ; or
(2) Upon the expiration of the time allowed for filing a petition for certiorari, if
the order of the Commission has been affirmed, or the petition for review dismissed
by the circuit court of appeals, and no petition for certiorari has been duly filed; or
(3) Upon the denial of a petition for certiorari, if the order of the Com-mission has
been affirmed or the petition for review dismissed by the circuit court of appeals; or
(4) Upon the expiration of thirty days from the date of issuance of the mandate of
the Supreme Court, if such Court directs that the order of the Commission be
affirmed or the petition for review dismissed.
(h) If the Supreme Court directs that the order of the Commission be modified or set
aside, the order of the Commission rendered in accordance with the mandate of the
Supreme Court shall become final upon the expiration of thirty days from the time it
was rendered, unless within such thirty days either party has instituted proceedings to
have such order corrected to accord with the mandate, in which event the order of the
Commission shall become final when so corrected.
(I) If the order of the Commission is modified or set aside by the circuit court of
appeals, and if (1) the time allowed for filing a petition for certiorari has expired and

no such petition has been duly filed, or (2) the petition for certiorari has been denied,
or (3) the decision of the court has been affirmed by the Supreme Court, then the order
of the Commission rendered in accordance with the mandate of the circuit court of
appeals shall become final on the expiration of thirty days from the time such order
of the Commission was rendered, unless within such thirty days either party has
instituted proceedings to have such order corrected so that it will accord with the
mandate, in which event the order of the Commission shall become final when so
corrected.
(j) If the Supreme Court orders a rehearing ; or if the case is remanded by the circuit
court of appeals to the Commission for a rehearing, and if (l) the time allowed for
filing a petition for certiorari has expired, and no such petition has

FEDERAL TRADE COMMISSION ACT

103

been duly filed, or (2) the petition for certiorari has been denied, or (3) the decision of
the court has been affirmed by the Supreme Court, then the order of the Commission
rendered upon such rehearing shall become final in the same manner as though no
prior order of the Commission has been rendered.
(k) As used in this section the term “mandate,” in case a mandate has been recalled
prior to the expiration of thirty days from the date of issuance thereof, means the final
mandate.
(l) Any person, partnership, or corporation who violates an order of the Commission
to cease and desist after it has become final, and while such order is in effect, shall
forfeit and pay to the United States a civil penalty of not more than $5,000 for each
violation, which shall accrue to the United States and may be recovered in a civil
action brought by the United States.
Sec. 6. That the commission shall also have power-(a) To gather and compile information concerning, and to investigate 5 from time to
time the organization, business, conduct, practices, and management of any
corporation engaged in commerce, excepting banks and common carriers subject to the
Act to regulate commerce, 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, or any
class of them, or any of them, respectively, 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. Such reports and
answers shall be made under oath, or otherwise, as the commission may prescribe, and
shall be filed with the commission within such reasonable period as the commission
may prescribe, unless additional time be granted in any case by the commission.
(c) Whenever a final decree has been entered against any defendant corporation in
any suit brought by the United States to prevent and restrain any violation of the
antitrust Acts, to make investigation, upon its own initiative, of the manner in which
the decree has been or is being carried out, and upon the application of the Attorney
General it shall be its duty to make such investigation. It shall transmit to the Attorney
General a report embodying its findings and recommendations as a result of any such
investigation and the report shall be made public in the discretion of the commission.
(d) Upon the direction of the President or either 6 House of Congress to investigate
and report the facts relating to any alleged violations of the antitrust Acts by any
corporation.
(e) Upon the application of the Attorney General to investigate and make
recommendations for the readjustment of the business of any corporation alleged to
be violating the antitrust Acts in order that the corporation may thereafter maintain Its
organization, management, and conduct of business in accordance with law.
(f) To make public from time to time such portions of the information obtained by
it hereunder, except trade secrets and names of customers, as it shall deem expedient
in the public interest ; and to make annual and special reports to the Congress and to
submit therewith recommendations for additional legislation; and to provide for the
publication of its reports and decisions in such form and manner as may be best
adapted for public information and use.

(g) From time to time to classify corporations and to make rules and regulations for
the purpose of carrying out the provisions of this Act.
(h) 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.
SEC. 7. That In any suit in equity brought by or under the direction of the Attorney
General as provided In the antitrust Acts, the court may, upon the conclusion of the
testimony therein, if it shall be then of opinion that the complainant is entitled to relief,
refer said suit to the commission, as a master in chancery, to ascertain and report an
appropriate form of decree therein. The Commission
See footnote on p. 2.
6 See footnote on p. 2.

5

104

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION ACT

shall proceed upon such notice to the parties and under such rules of procedure as the
court may prescribe, and upon the coming in of such report such exceptions may be
filed and such proceedings had In relation thereto as upon the report of a master in
other equity causes, but the court may adopt or reject such report, in whole or in part,
and enter such decree as the nature of the case may in its judgment require.
SEC. 8. That the several departments and bureaus of the Government when directed
by the President shall furnish the commission, upon Its request, all records, papers, and
information in their possession relating to any corporation subject to any of the
provisions of this Act, and shall detail from time to time such officials and employees
to the commission as he may direct.
SEC. 9. That for the purposes of this Act the commission, or its duly authorized
agent or agents, shall at all reasonable times have access to, for the purpose of
examination, and the right to copy any documentary evidence of any corporation being
investigated or proceeded against; and the commission shall have power to require by
subpoena the attendance and testimony of witnesses and the production of all such
documentary evidence relating to any matter under investigation. Any member of the
commission may sign subpoenas, and members and examiners of the commission may
administer oaths and affirmations, examine witnesses, and receive evidence.
Such attendance of witnesses, and the production of such documentary evidence,
may be required from any place in the United States, at any designated place of
hearing. And in case of disobedience to a subpoena the commission may invoke the
aid of any court of the United States in requiring the attendance and testimony of
witnesses and the production of documentary evidence.
Any of the district courts of the United States within the jurisdiction of which such
inquiry is carried on may, in case of contumacy or refusal to obey a subpoena issued
to any corporation or other person, issue an order requiring such corporation or other
person to appear before the commission, or to produce documentary evidence if so
ordered, or to give evidence touching the matter in question ; and any failure to obey
such order of the court may be punished by such court as a contempt thereof.
Upon the application of the Attorney General of the United States, at the request of
the commission, the district courts of the United States shall have jurisdiction to issue
writs of mandamus commanding any person or corporation to comply with the
provisions of this Act or any order of the commission made In pursuance thereof.
The commission may order testimony to be taken by deposition in any proceeding
or investigation pending under this Act at any stage of such proceeding or
investigation. Such depositions may be taken before any person designated by the
commission and having power to administer oaths. Such testimony shall be reduced
to writing by the person taking the deposition, or under his direction, and shall then be
subscribed by the deponent. Any person may be compelled to appear and depose and
to produce documentary evidence in the same manner as witnesses may be compelled
to appear and testify and produce documentary evidence before the commission as
hereinbefore provided.
Witnesses summoned before the commission shall be paid the same fees and mileage
that are paid witnesses in the courts of the United States, and witnesses whose
depositions are taken, and the persons taking the same shall severally be entitled to the
same fees as are paid for like services in the courts of the United States.
No person shall be excused from attending and testifying or from producing
documentary evidence before the commission or in obedience to the subpoena of the
commission on the ground or for the reason that the testimony or evidence,

documentary or otherwise, required of him may tend to criminate him or subject him
to a penalty or forfeiture. But no natural person shall be prosecuted or subjected to any
penalty or forfeiture for or on account of any transaction, matter, or thing concerning
which he may testify, or produce evidence, documentary or otherwise, before the
commission in obedience to a subpoena issued by it ; Provided, That no natural person
so testifying shall be exempt from prosecution and punishment for perjury committed
in so testifying.
Sec. 10. That any person who shall neglect or refuse to attend and testify, or to
answer any lawful inquiry, or to produce documentary evidence, if in his power to do
so, in obedience to the subpoena or lawful requirement of the commission, shall be
guilty of an offense and upon conviction thereof by a court of competent jurisdiction
shall be punished by a fine of not less than $1,000 nor

FEDERAL TRADE COMMISSION ACT

105

more than $5,000, or by imprisonment for not more than one year, or by both such fine
and imprisonment.
Any person who shall willfully make, or cause to be made, any false entry or
statement of fact in any report required to be made under this Act, or who shall
willfully make, or cause to be made, any false entry in any account, record, or
memorandum kept by any corporation subject to this Act, or who shall willfully
neglect or fail to make, or cause to be made, full, true, and correct entries in such
accounts, records, or memoranda of all facts and transactions appertaining to the
business of such corporation, or who shall willfully remove out of the jurisdiction of
the United States, or willfully mutilate, alter, or by any other means falsify any
documentary evidence of such corporation, or who shall willfully refuse to submit to
the commission or to any of its authorized agents, for the purpose of inspection and
taking copies, any documentary evidence of such corporation in his possession or
within his control, shall be deemed guilty of an offense against the United States, and
shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not less than $1,000 nor more than $5,000 or to imprisonment for
a term of not more than three years, or to both such fine and imprisonment.
If any corporation required by this Act to file any annual or special report shall fail
so to do within the time fixed by the commission for filing the same, and such failure
shall continue for thirty days after notice of such default, the corporation shall forfeit
to the United States the sum of $100 for each and every day of the continuance of such
failure, which forfeiture shall be payable into the Treasury of the United States, and
shall be recoverable in a civil suit in the name of the United States brought in the
district where the corporation has its principal office or in any district in which it shall
do business. It shall be the duty of the various district attorneys, under the direction
of the Attorney General of the United States, to prosecute for the recovery of
forfeitures. The costs and expenses of such prosecution shall be paid out of the
appropriation for the expenses of the courts of the United States.
Any officer or employee of the commission who shall make public any information
obtained by the commission without its authority, unless directed by a court, shall be
deemed guilty of a misdemeanor, and, upon conviction thereof, shall be punished by
a fine not exceeding $5,000, or by imprisonment not exceeding one year, or by fine
and imprisonment, in the discretion of the court.
SEC. 11. Nothing contained in this Act shall be construed to prevent or interfere
with the enforcement of the provisions of the antitrust Acts or the Acts to regulate
commerce, nor shall anything contained in the Act be construed to alter, modify, or
repeal the said antitrust Acts or the Acts to regulate commerce or any part or parts
thereof.
SEC. 12. (a) It shall be unlawful for any person, partnership, or corporation to
disseminate, or cause to be disseminated, any false advertisement-(l) By United States mails, or in commerce by any means, for the purpose of
inducing, or which is likely to induce, directly or indirectly, the purchase of food,
drugs, devices, or cosmetics ; or
(2) By any means, for the purposes of inducing, or which is likely to induce
directly or indirectly, the purchase in commerce of food, drugs, devices, or cosmetics.
(b) The dissemination or the causing to be disseminated of any false advertisement
within the provisions of subsection (a) of this section shall be an unfair or deceptive
act or practice in commerce within the meaning of section 5.
SEC. 13. (a) Whenever the Commission has reason to believe--

(l) that any person, partnership, or corporation is engaged in, or is about to engage
in, the dissemination or the causing of the dissemination of any advertisement in
violation of section 12, and
(2) that the enjoining thereof pending the issuance of a complaint by the
Commission under section 5, and until such complaint is dismissed by the
Commission or set aside by the court on review, or the order of the Commission to
cease and desist made thereon has become final within the meaning of section 5,
would be to the interest of the public,
the Commission by any of its attorneys designated by it for such purpose may bring
suit in a district court of the United States or In the United States court of any
Territory, to enjoin the dissemination or the causing of the dissemination of such
advertisement. Upon proper showing a temporary injunction or restraining

106

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION, 1945

order shall be granted without bond. Any such suit shall be brought in the district in
which such person, partnership, or corporation resides or transacts business.
(b) Whenever it appears to the satisfaction of the court in the case of a newspaper,
magazine, periodical, or other publication, published at regular intervals-(l) that restraining the dissemination of a false advertisement in any particular
issue of such publication would delay the delivery of such issue after the regular time
therefor, and
(2) that such delay would be due to the method by which the manufacture and
distribution of such publication is customarily conducted by the publisher in
accordance with sound business practice, and not to any method or device adopted for
the evasion of this section or to prevent or delay the issuance of an injunction or
restraining order with respect to such false advertisement or any other advertisement.
the court shall exclude such Issue from the operation of the restraining order or
injunction.
Sec. 14.7 (a) Any person, partnership, or corporation who violates any provision of
section 12 (a) shall, if the use of the commodity advertised may be injurious to health
because of results from such use under the conditions pre-scribed in the advertisement
thereof, or under such conditions as are customary or usual, or if such violation is with
intent to defraud or mislead, be guilty of a misdemeanor, and upon conviction shall be
punished by a fine of not more than $5,000 or by imprisonment for not more than six
months, or by both such fine and imprisonment; except that if the conviction is for a
violation committed after a first conviction of such person, partnership, or corporation,
for any violation of such section, punishment shall be by a fine of not more than
$10,000 or by imprisonment for not more than one year, or by both such fine and
imprisonment : Provided, That for the purposes of this section meats and meat food
products duly inspected, marked, and labeled In accordance with rules and regulations
issued under the Meat Inspection Act approved March 4, 1907, as amended, shall be
conclusively presumed not injurious to health at the time the same leave official
“establishments.”
(b) No publisher, radio-broadcast licensee, or agency or medium for the dissemination of advertising, except the manufacturer, packer, distributor, or seller of the
commodity to which the false advertisement relates, shall be liable under this section
by reason of the dissemination by him of any false advertisement, unless he has
refused on the request or the Commission, to furnish the Commission the name and
post-office address of the manufacturer, packer, distributor, seller, or advertising
agency, residing in the United States, who caused him to disseminate such
advertisement. No advertising agency shall be liable under this section by reason of
the causing by it of the dissemination of any false advertisement, unless it has refused,
on the request of the Commission, to furnish the Commission the name and post-office
address of the manufacturer, packer, distributor, or seller, residing in the United States,
who caused it to cause the dissemination of such advertisement.
SEC. 15. For the purposes of section 12, 13, and 14-(a) The term “false advertisement” means an advertisement, other than labeling,
which is misleading in a material respect ; and In determining whether any
advertisement Is misleading, there shall be taken into account (among other things) not
only representations made or suggested by statement, word, design, device, sound, or
any combination thereof, but also the extent to which the advertisement fails to reveal

facts material in the light of such representations or material with respect to
consequences which may result from the use of the commodity to which the
advertisement relates under the conditions prescribed in said advertisement or, under
such conditions as are customary or usual. No advertisement of a drug shall be deemed
to be false If it is disseminated only to members of the medical profession, contains
no false representations of a material fact, and includes, or is accompanied in each
instance by truthful disclosure of, the formula showing quantitatively each ingredient
of such drug.
(b) The term “food” means (l) articles used for food or drink for man or other
animals, (2) chewing gum, and (3) articles used for components of any such article.
Section 5 (b) of the amending Act of 1938 provides :
Sec. 5 (b) Section 14 of the Federal Trade Commission Act, added to such Act by section 4 of this Act,
shall take effect on the expiration of sixty days after the date of the enactment of this Act.
7

RULES OF PRACTICE

107

(c) The term “drug” means (l) articles recognized in the official United States
Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official
National Formulary, or any supplement to any of them ; and (2) articles Intended for
use In the diagnosis, cure, mitigation, treatment, or prevention of disease In man or
other animals ; and (3) articles (other than food) intended to affect the structure or any
function of the body of man or other animals ; and (4) articles intended for use as a
component of any article specified in clause (l), (2) , or (3); but does not Include
devices or their components, parts, or accessories.
(d) The term “device” (except when used in subsection (a) of this section) means
instruments, apparatus, and contrivances, including their parts and accessories,
intended (l) for use In the diagnosis, cure, mitigation, treatment, or prevention of
disease in man or other animals ; or (2) to affect the structure or any function of the
body of man or other animals.
(e) The term “cosmetic” means (l) articles to be rubbed, poured, sprinkled, or
sprayed on, introduced into, or otherwise applied to the human body or any part
thereof intended for cleansing, beautifying, promoting attractiveness, or altering the
appearance, and (2) articles intended for use as a component of any such articles;
except that such term shall not include soap.
Sec. 16. Whenever the Federal Trade Commission has reason to believe that any
person, partnership, or corporation is liable to a penalty under section 14 or under
subsection (l) of section 5, It shall certify the facts to the Attorney General, whose duty
it shall be to cause appropriate proceedings to be brought for the enforcement of the
provisions of such section or subsection.
SEC. 17. If any provision of this Act, or the application thereof to any person,
partnership, corporation, or circumstance, Is held invalid, the remainder of the Act and
the application of such provision to any other person, partnership, corporation, or
circumstance shall not be affected thereby.
SEC. 18. This Act may be cited as the “Federal Trade Commission Act.”
Original act approved September 26, 1914.
Amended act approved March 21, 1938.
OTHER ACTS ADMINISTERED BY THE COMMISSION
In addition to the Federal Trade Commission Act, the Commission also administers
section 2 of the Clayton Act (15 U.S. C., sec. 13), as amended by the Robinson-Patman
Anti-discrimination Act, and sections 3, 7, and 8 of the Clayton Act (15 U.S. C., secs.
14, 18, and 19); the Export Trade Act (15 U.S. C., secs. 61-65) ; the Wool Products
Labeling Act (15 U. S. C., sec. 68).

RULES OF PRACTICE
RULE I. THE COMMISSION
Offices.--The principal office of the Commission is at Washington, D. C.
All communications to the Commission must be addressed to Federal Trade
Commission, Washington 25, D. C., unless otherwise specifically directed.
Branch Offices are maintained at New York, Chicago, San Francisco, Seattle, and
New Orleans.
Their addresses are : Federal Trade Commission, Room 509, 45 Broadway, New
York, N. Y.; Federal Trade Commission, 1118 New Post Office Building, 433 West

Van Buren Street, Chicago, Ill.; Federal Trade Commission, Federal Office Building,
55 New Montgomery Street, San Francisco, Calif.; Federal Trade Commission, 801
Federal Building Seattle, Wash,; Federal Trade Commission, 1107 Pere Marquette
Building, New Orleans, La.
Hours.--Offices are open on each business day, except Saturday from 8: 30 a. m. to
5:15 p. m., and on Saturdays from 8:30 a.m. to 12:30 p.m. 1
Sessions.--The Commission may meet and exercise all its powers at any place, and
may, by one or more of its members, or by such examiners as it may designate,
prosecute any inquiry necessary to its duties in any part of the United States.
Sessions of the Commission for hearings will be held as ordered by the Commission.
Sessions of the Commission for the purpose of making orders and for transaction of
other business unless otherwise ordered will be held at the principal
1

The Chicago office is open week days, 9 a.m. to 5:45 p.m.; Saturdays, 9 a.m. to 1 p.m.

108

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

office of the Commission at Pennsylvania Avenue at Sixth Street, Washington, D. C.,
on each business day at 10 a. m.
Quorum.--A majority of the members of the Commission shall constitute a quorum
for the transaction of business.
RULE II. THE SECRETARY
The Secretary is the executive officer of the Commission and shall have the legal
custody of its seal, papers, records, and property; and all orders of the Commission
shall be signed by the Secretary or such other person as may be authorized by the
Commission.
RULE III. SERVICE
Complaints, orders, and other processes of the Commission, and briefs in support of
the Complaint, will be served by the secretary of the Commission by registered mail,
except when service by other method shall be specifically ordered by the Commission,
by registering and mailing a copy thereof addressed to the person, partnership, or
corporation to be served at his or its principal office or place of business. When
proceeding under the Federal Trade Commission Act service may also be made at the
residence of the person, partnership, or corporation to be served.
When service is not accomplished by registered mail complaints, orders, or other
processes of the Commission, and briefs in support of the complaint may be served by
anyone duly authorized by the Commission, or by any examiner of the Commission,
(a) By delivering a copy of the document to the person to be served, or to a member
of the partnership to be served, or to the president, secretary, or other executive officer
or a director of the corporation to be served; or
(b) By leaving a copy thereof at the principal office or place of business of such
person, partnership, or corporation. When proceeding under the Federal Trade
Commission Act service may also be made at the residence of the person, partnership,
or corporation to be served.
The return post-office receipt for said complaint, order, or other process or brief
registered and mailed as aforesaid, or the verified return by the person serving such
complaint, order, or other process or brief, setting forth the manner of said service,
shall be proof of the service of the document.
RULE IV. APPEARANCE
Any individual or member of a partnership which is a party to any proceeding before
the Commission may appear for himself, or such partnership upon adequate
identification, and a corporation or association may be represented by a bona fide
officer of such corporation or association upon a showing of adequate authorization
therefor.
A party may also appear by an attorney at law possessing the requisite qualifications,
as hereinafter set forth, to practice before the Commission.
Attorneys at law who are admitted to practice before the Supreme Court of the
United States, or the highest court of any State or Territory of the United States, or the
United States Court of Appeals for the District of Columbia, or the District Court of
the United States for the District of Columbia, may practice before the Commission.
No register of attorneys who may practice before the Commission is maintained. No

application for admission to practice before the Commission is required. A written
notice of appearance on behalf of a specific party or parties in the particular
proceeding should be submitted by attorneys desiring to appear for such specific party
or parties, which notice shall contain a statement that the attorney is eligible under the
provisions of this rule. Any attorney practicing before the Commission or desiring so
to practice may, for good cause shown, be disbarred or suspended from practicing
before the Commission, but only after he has been afforded an opportunity to be heard
in the matter.
No former officer, examiner, attorney, clerk, or other former employee of this
Commission shall appear as attorney or counsel for or represent any party in any
proceeding resulting from any investigation, the files of which came to the personal
attention of such former officer, examiner, attorney, clerk, or other former employee
during the term of his service or employment with the Commission.

RULES OF PRACTICE

109

RULE V. INTERVENTION
Any person, partnership, corporation, or association desiring to intervene in a
contested proceeding shall make application in writing, setting out the grounds on
which lie or it claims to be interested
The Commission may, by order, permit intervention by counsel or in person to such
extent and upon such terms as it shall deem proper.
RULE VI. DOCUMENTS
Filing.--All documents required to be filed with the Commission in any proceeding
shall be filed with the Secretary of the Commission.
Title.--Documents shall clearly show the docket number and title of the proceeding.
Copies.--Documents, other than correspondence, shall be filed in triplicate, except
as otherwise specifically required by these rules.
Form.--Documents not printed shall be typewritten, on one side of paper only; letter
size, eight (8) inches by ten and one-half (10 ½) inches; left margin, one and one-half
(11/2) inches; right margin, one (l) inch.
Documents may be printed, in ten (10) or twelve (12) point type, on good, unglazed
paper, of the dimensions and with the margins above specified.
Documents shall be bound at left side only.
The originals of all answers, briefs, motions, and other documents shall be signed
in ink, by the respondent or his duly authorized attorney. Where the respondent is an
individual or a partnership, the originals of said documents shall be signed by said
individual or by one of the partners, or by his or its attorney. Where the respondent is
a corporation, the originals of said documents shall be signed under the corporate
name by a duly authorized official of such corporation, or by its attorney. Where the
respondent is an association, the originals of said documents shall be signed under the
association name for said association by a duly authorized official of such association,
or by its attorney.
Answers shall be signed in quadruplicate. One copy of a brief or other document
required to be printed shall be signed as the original.
RULE VII. APPLICATIONS FOR COMPLAINT
Any person, partnership, corporation, or association may apply to the Commission
to institute a proceeding in respect to any violation of law over which the Commission
has jurisdiction.
Such application for complaint shall be in writing, signed by or in behalf of the
applicant, and shall contain a short and simple statement of the facts constituting the
alleged violation of law and the name and address of the applicant and of the party
complained of.
RULE VIII. COMPLAINTS
Whenever the Commission shall have reason to believe that there is a violation of
law over which the Commission has jurisdiction, and in case of violation of the
Federal Trade Commission Act, if it shall appear to the Commission that a proceeding
by it in respect thereof would be to the interest of the public, the Commission shall

issue and serve upon the proper parties a complaint stating its charges and containing
a notice of a hearing upon a day and at the place therein fixed, at least thirty (30) days
after the service of said complaint.
RULE IX. ANSWERS
In case of desire to contest the proceeding the respondent shall, within twenty (20)
days from the service of the complaint, file with the Commission an answer to the
complaint. Such answer shall contain a concise statement of the facts which constitute
the ground of defense. Respondent shall specifically admit or deny or explain each of
the facts alleged in the complaint, unless respondent is without knowledge, in which
case respondent shall so state.
Four copies of answers shall be furnished. All answers shall be signed in ink, by the
respondent or by his attorney at law. Corporations or associations shall file answers
through a bona fide officer or by an attorney at law. Answers shall show the office and
post-office address of the signer.

110

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Failure of the respondent to file answer within the time above provided and failure
to appear at the time and place fixed for hearing shall be deemed to authorize the
Commission, without further notice to respondent, to proceed In regular course on the
charges set forth in the complaint.
If respondent desires to waive hearing on the allegations of fact set forth in the
complaint and not to contest the facts, the answer may consist of a statement that
respondent admits all the material allegations of fact charged in the complaint to be
true. Respondent by such answer shall be deemed to have waived a hearing on the
allegations of fact set forth in said complaint and to have authorized the Commission,
without further evidence, or other intervening procedure, to find such facts to be true.
Contemporaneously with the filing of such answer the respondent may give notice
in writing that he desires to be heard on the question may give notice in writing that
he desires to be heard on the question as to whether the admitted facts constitute the
violation of law charged in the complaint. Pursuant to such notice, the respondent my
file a brief, directed solely to that question, in accordance with the rule XXIII.
RULE X. MOTIONS
Motions before the Commission or the trial examiner shall state briefly the purpose
thereof and all supporting affidavits, records, and other papers, except such as have
been previously filed, shall be filed with such motions and clearly referred to therein.
Motions in any proceeding before a trial examiner which relate to the introduction
or striking of evidence, to matters of procedure, or to any other matters coming within
the scope of the trial examiner’s authority shall be made to the trial examiner and shall
be ruled on by him. All other motions in any proceeding, except as otherwise provided
in these rules, shall be addressed to and shall be ruled on by the Commission, but in
the case of motions to dismiss for alleged failure of proof based upon testimony taken
before a trial examiner, the motion will be referred to the trial examiner for report and
recommendation before a ruling is made by the Commission.
RULE XI. CONTINUANCE AND EXTENSION OF TIME
Except as otherwise expressly provided by law, the Commission, for cause shown,
may extend any time limits prescribed for filing any papers, and may continue or
adjourn any hearings. A hearing before a trial examiner shall begin at the time and
place ordered by the Commission, but thereafter may be adjourned from time to time
by the trial examiner or the Commission.
Applications for continuances and extensions of time should be made prior to the
expiration of time prescribed by these rules.
RULE XII. HEARINGS ON COMPLAINTS
All hearings before the Commission or trial examiners on complaints issued by the
Commission shall be public, unless otherwise ordered by the Commission.
Hearings shall be stenographically reported by the official reporter of the

Commission and a transcript thereof shall be made which shall be a part of the record
of the proceeding. The record so made shall be the sole official record. Transcripts will
be supplied to a respondent or respondents and to the public by the official reporter at
rates not to exceed the maximum rates fixed by contract between the Commission and
the reporter.
Upon the joining of issue in a proceeding upon complaint issued by the Commission,
the taking of evidence therein shall proceed with all reasonable diligence and with the
least practicable delay.
Not less than five (5) days' notice of the time and place of the initial hearing before
the Commission, a Commissioner, or a trial examiner, shall be given by the
Commission to counsel of record or to parties.
RULE XIII. HEARINGS ON INVESTIGATIONS
When a matter for investigation is referred to a single Commissioner, or examiner,
for examination or report, such Commissioner, or examiner, if authorized by the
Commission, may conduct or hold conferences or hearings thereon, and reasonable
notice of the time and place of such hearings shall be given to parties in interest and
posted.
The chief counsel, or such attorney as shall be designated by him, or by the
Commissioner, or by the Commission, shall attend such hearings and prosecute

RULES OF PRACTICE

111

the investigation, which shall be public, unless otherwise ordered by the Commission.
RULE XIV. TRIAL EXAMINERS
When evidence is to be taken in a proceeding upon complaint issued by the
Commission, a trial examiner may be designated for that purpose by the Commission.
It shall be the duty of the trial examiner to complete the taking of evidence with all
due dispatch.
The trial examiner shall state the place, day, and hour to which the taking of
evidence may from time to time be adjourned.
The trial examiner is charged with the duty of conducting a fair and impartial
hearing and of maintaining order in form and manner consistent with the dignity of the
Commission. He will note on the record any disregard by counsel of his rulings on
matters of order and procedure and where he deems it necessary shall make special
written report thereof to the Commission. In the event that counsel supporting the
complaint or counsel for any respondent shall be guilty of disrespectful, disorderly, or
contumacious language or conduct In connection with any hearing, the trial examiner
may suspend the proceeding and submit to the Commission his report thereon, together
with his recommendations as to whether any rule should be issued to show cause why
such counsel should not be suspended or disbarred pursuant to Rule VII or subjected
to other appropriate action in respect thereto. A copy of such trial examiner’s report
shall be furnished to any counsel upon whose language or conduct such report Is made,
and the Commission will take disciplinary action only after an opportunity for hearing
has been accorded such counsel.
RULE XV. SUBPOENAS
Subpoenas requiring the attendance of witnesses from any place in the United States,
at any designated place of hearing, may be issued by the presiding trial examiner or a
member of the Commission. Application therefor may be made either to the Secretary
of to the presiding trial examiner.
Subpoenas for the production of the documentary evidence will be issued only upon
application in writing to the Commission. The application must specify, as exactly as
possible the documents desired, and show their competence, relevancy, and
materiality. The application by a respondent shall be verified by oath or affirmation.
RULE XVI. WITNESSES
Witnesses at formal hearings shall be examined orally. Witnesses summoned in
support of the complaint shall be paid the same fees and mileage as are paid witnesses
in the courts of the United States.
Witnesses whose depositions are taken, and the persons taking such depositions,
shall severally be entitled to the same fees as are paid for like services In the courts of
the United States.
Witness fees and mileage, and fees for depositions, shall be paid by the party at
whose instance witnesses appear.
RULE XVII. EVIDENCE
Documentary.--Where relevant and material matter offered in evidence is embraced

in a document containing other matter not material or relevant and not intended to be
put in evidence, such immaterial or irrelevant parts shall be excluded, and shall be
segregated insofar as practicable.
Objections.--Objections to evidence before a trial examiner, a Commissioner, or the
Commission, shall be in short form, stating the grounds of objections relied upon, and
the transcript shall not include argument or debate thereon except as ordered by the
trial examiner, a Commissioner, or the Commission. Rulings on such objections shall
be part of the transcript.
RULE XIX. DEPOSITIONS
The Commission may order evidence to be taken by disposition in any proceeding
or investigation pending at any stage of such proceeding or investigation. Such
depositions may be taken before any person designated by the Commission and having
power to administer oaths.

112

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Unless notice be waived, no deposition S hall be taken except after at least five (5)
days’ notice to the parties within the United States, and fifteen (15) days’ notice when
deposition is to be taken elsewhere.
Any party desiring to take the deposition of a witness shall make application in
writing, setting out the reasons why such deposition should be taken, and stating the
time when, the place where and the name and post-office address of the person before
whom it is desired the deposition be taken, the name and post-office address of the witness, and the subject matter or matters concerning which the witness is expected to
testify. If good cause be shown, the Commission will make and serve upon the parties,
or their attorneys, an order wherein the Commission shall name the witness whose
deposition is to be taken and specify the time when, the place where, and the person
bef ore whom the witness is to testify, but such time and place, and the person before
whom the deposition is to be taken, so specified in the Commission’s order, may or
may not be the same as those named in said application to the Commission.
The testimony of the witness shall be reduced to writing by the officer before whom
the deposition is taken, or under his direction after which the deposition shall be
subscribed by the witness and certified in usual form by the officer. After the
deposition has been so certified, it shall , together with three additional copies thereof
made by such officer or under his direction, be forwarded by such officer under seal
in an envelope addressed to the Commission at its office in Washington, D. C. Such
deposition, unless otherwise ordered by the Commission for good cause shown, shall
be filed in the record in said proceeding and a copy thereof supplied to the party upon
whose application said deposition was taken , or his attorney.
Depositions shall be typewritten, on one side of paper only; letter size, eight (8)
inches by ten and one-half (10 ½) inches; left margin, one and one-half (l ½) inches;
right margin, one (1) inch.
Depositions shall be bound at left side only.
RULE XIX. ADMISSION OF FACTS AND OF GENUINENESS OF
DOCUMENTS
At any time after answer has been filed counsel or parties In any controversy may
serve upon the opposing side a written request for the admission of the genuineness
and authenticity of any relevant documents described in and exhibited with the request
or the admission of the truth of any relevant matters of fact set forth in such
documents.
Copies of the documents shall be delivered with the request unless copies have
already been furnished. Each of the matters on which an admission is so requested
shall be deemed admitted unless, within a period designated within the request, not
less than ten days after service thereof or within such further time as the Commission
or the trial examiner may allow on motion and notice, the party so served serves upon
the party making the request, a sworn statement either denying specifically the matters
of which an admission is requested, or setting forth in detail the reasons why he can
neither truthfully admit nor deny those, matters. Service required hereunder may be
made upon a respondent either by registering and mailing or by delivering a copy of
the documents to be served to the respondent or his attorney, or by leaving a copy at
the principal office or place of business of either. Service upon the attorney supporting
the complaint may be either by registering and mailing or by delivering a copy of the
documents to be served to such attorney.

RULE XX. TRIAL EXAMINER’S REPORT
The trial examiner shall, within fifteen (15) days after receipt by him of the complete
stenographic transcript of all testimony in a proceeding, make his report upon the
evidence.
A copy of such report shall forthwith be served upon each attorney for the
Commission, upon each attorney for respondents, and upon each respondent not
represented by counsel.
The trial examiners’ reports is not a report or finding of the Commission. Such
report is advisory only and is not binding upon the Commission.
RULE XXI. EXCEPTIONS
Attorneys or other persons served with a copy of the report of the trial examiner,
within ten (10) days after receipt of such copy of report, file, in writing, their
exception, if any, to the report.

RULES OF PRACTICE

113

They shall specify the particular part of the report to which exception is made, and
the exceptions shall include any additional facts which the person filing the exception
may deem proper.
Citations to the record shall be made in support of the exceptions.
Seven (7) copies of the exceptions, signed, in ink, shall be filed.
A copy of such exceptions shall forthwith be served upon each of the other attorneys
and respondents who were served with a copy of the trial examiner’s report.
If exceptions are to be argued, they shall be argued at the time of final argument
upon the merits.
RULE XXII. STATEMENTS OF FACTS
When, in the opinion of the trial examiner engaged in taking evidence In any
proceeding upon complaint issued by the Commission, the size of the transcript, or
complication or importance of the issues involved warrants, he may, of his own
motion, or at the request of counsel, at the close of taking of evidence, announce to
attorneys for the Commission and for respondents that the trial examiner will receive
within such time as he shall fix, a statement in writing from attorneys for the
Commission and attorneys for respondents setting forth, in concise outline, the
contentions of each as to the facts proved in the proceeding. The time so fixed shall
not change the times limited in Rule XX for filing report by the trial examiner or Rule
XXIII for the filing of briefs.
Copy of any such statements shall be furnished to opposing counsel by the party
filing the statement, but such statements are not to be argued before the trial examiner,
and are not a part of the record of the proceeding.
RULE XXIII. BRIEFS
Filing.--Any party to a proceeding may file a brief with the Secretary of the
Commission, in support of his contentions, within the time limits fixed by these rules.
Briefs not filed on or before the time fixed in the rules will be received only by
special permission of the Commission.
Appearance of additional counsel in a case will not constitute grounds for extending
time for filing briefs.
Time.--Opening brief shall be filed by the attorney supporting the complaint within
twenty (20) days after service upon him of a copy of the report of the trial examiner.
Brief on behalf of respondent shall be filed within twenty (20) days after service
upon respondent or respondent’s attorney of copy of brief in support of the complaint.
Where respondent shall have filed an answer admitting all material allegations of
fact, the time so limited shall begin to run at the time of filing such answer.
Reply briefs in support of the complaint, if any, shall be filed within ten (10) days
after filing of brief on behalf of respondent.
Number.--Twenty (20) copies of each brief shall be filed.
Contents.--Briefs, except the reply brief in support of the complaint, shall contain,
in the following order:
(a) A concise abstract or statement of the case.
(b) A brief of the argument, exhibiting a clear statements of the points of fact or law
to be discussed, with references to the pages of the record and the authorities relied
upon in support of each point.
(c) The exceptions, if any, to the report of the trial examiner.

Index.-- Briefs comprising more than ten (10) pages shall contain on their top fly
leaves a subject index with page references. The subject index shall be supplemented
by an alphabetical list of all cases referred to, with references to pages where
references are cited.
Reply briefs.--Reply brief in support of the complaint shall be filed only with
permission of the Commission, and shall be strictly in answer to brief on behalf of
respondent.
No further reply breif on behalf of respondent shall be filed.
Form.--Briefs shall be printed, multigraphed, or otherwise neatly processed on good
unglazed white paper in type not smaller than ten (10) point double leaded, citations
and quotations single leaded; footnotes not less than eight (8) point leaded. Type page
shall not be more than twenty-nine: (29) picas wide by approximately forty-eight (48)
picas deep and trimmed page shall

114

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

be seven (7) inches by ten (10) inches, with an inside margin of not less than one (1)
inch.
Signing.--At least one copy of each brief shall be signed in ink, by the respondent
or his duly authorized attorney, as prescribed in Rule XII.
RULE XXIV. ORAL ARGUMENTS
Oral arguments before the Commission shall be had as ordered, on written
application of the chief trial counsel of the Commission, or of the respondent, or of
attorney for respondent, filed within fifteen (15) days after filing of brief on behalf of
respondent.
Appearance of additional counsel in a case will not constitute grounds for enlarging
time for oral argument.
RULE XXV. REPORTS SHOWING COMPLIANCE WITH ORDERS AND WITH
STIPULATIONS
In every case where an order to cease and desist is issued by the Commission for the
purpose of preventing violations of law and in every instance where the Commission
approves and accepts a stipulation in which a party agrees to cease and desist from the
unlawful methods, acts , or practices involved, the respondents named in such orders
and the parties so stipulating shall file with the Commission, within sixty days of the
service of such order and within sixty days of the approval of such stipulation, a report,
in writing, setting forth in detail the manner and form in which they have complied
with said order or with said stipulation ; provided, however, that if within the said
sixty (00) day period respondent shall file petition for review in a circuit court of
appeals, the time for filing report of compliance will begin to run de novo from the
final judicial determination ; and provided further, that where the order prevents the
use of a false advertisement of a food, drug, device, or cosmetic, which may be injurious to health because of results from such use under the conditions prescribed in
the advertisement, or under such conditions as are customary or usual, or if the use of
such advertisement is with intent to defraud or mislead, an interim report stating
whether and how respondents intend to comply shall be filed within ten days.
Within its sound discretion, the Commission may require any respondent upon
whom such order has been served may and any party entering into such stipulation, to
file with the Commission, from time to time thereafter, further reports in writing,
setting forth in detail the manner and form in which they are complying with said order
or with said stipulation.
Reports of compliance shall be signed in ink by respondents or by the parties
stipulating.
RULE XXVI. REOPENING PROCEEDINGS
In any case where an order to cease and desist or an order dismissing a proceeding
has been issued by the Commission , the Commission may (a) in the case of an order
to cease and desist , at anytime until the transcript of the record in the proceeding has
been filed in a circuit court of appeals of the United States upon a petition for review
or enforcement, or after the expiration of the statutory time for filing of a petition for
review where no such petition has been filed, or (b) in the case of an order dismissing
a proceeding at any time thereafter, give reasonable notice to all respondents and to

all intervenors, if any, of a hearing as to whether the said proceeding should be reopened. If after said hearing the Commission shall have reason to believe that
conditions of fact or of law have so changed since the said order was made as to
require, or that the public interest requires, the reopening of such proceeding, the
Commission will issue an order for the reopening of the same.
RULE XXVII. TRADE PRACTICE CONFERENCE PROCEDURE
(a) Purpose.--The trade practice conference procedure has for its purpose the
establishment, by the Commission, of trade practice rules in the interest of industry
and the purchasing. public. This procedure affords opportunity for voluntary
participation by industry groups or other interested parties in the formulation of rules
to provide for elimination or prevention of unfair methods of competition, unfair or
deceptive acts or practices and other illegal trade practices. They may also include
provisions to foster and promote fair competitive conditions and to establish standards
of ethical business practices in harmony with public policy. No provision or rule,
however, may be approved by the Commission

RULES OF PRACTICE

115

which sanctions a practice contrary to law or which may aid or abet a practice contrary
to law.
(b) When authorized.--Trade practice conference proceedings may be authorized by
the Commission upon its own motion or upon application therefor whenever such
proceedings appear to the Commission to be in the interest of the public. In authorizing
proceedings, the Commission may consider whether such proceedings appear to have
possibilities (1) of constructively advancing the best interests of industry on sound
competitive principles in consonance with public policy, or (2) of bringing about more
adequate or equitable observance of laws under which the Commission has
jurisdiction, or (3) of otherwise protecting or advancing the public interest.
(c) Application.--Application for a trade practice conference may be filed with the
Commission by any interested pers on, party or group. Such application shall be in
writing and be signed by the applicant or the duly authorized representative of the
applicant or group desiring such conference. The following information, to the extent
known to the applicant, shall be furnished with such application or in a supplement
thereto:
(1) A brief description of the industry, trade, or subject to be treated.
(2) The kind and character of the products involved.
(3) The size or extent and the divisions of the industry or trade groups concerned.
(4) The estimated total annual volume of production or sales of the commodities
involved.
(5) List of membership of the industry or trade groups concerned in the matter.
(6) A brief statement of the acts, practices, methods of competition or other trade
practices desired to be considered, or drafts of suggests d trade practice rules.
(7) Evidence of authority to so act, where the application is signed by a person or
organization acting in behalf of orders.
(d) Informal discussions with members of the Commission’s staff.--Any interested
person or group may, upon request, be granted opportunity to confer in respect to any
proposed trade practice conference with the Commission’s trade practice conference
division, either prior or subsequent to the filing of any such application. They may also
submit any pertinent data or information which they desire to have considered. Such
submission shall be made during such period of time as the Commission or its duly
authorized official may designate.
(e) Industry conferences.--Reasonable public notice of the time and place of any
such authorized conference shall be issued by the Commission. A member of the
Commission or of its staff shall have charge of the conference and shall conduct the
conference pursuant to direction of the Commission and in such manner as will
facilitate the proceeding and afford appropriate consideration of matters properly
coming before the conference. A transcript of the conference proceedings shall be
made, which, together with all rules resolutions, modifications, amendments or other
matters offered, shall be filed in the office of the Commission and submitted for its
consideration.
(f) Public hearing on proposed rules.--Before final approval by the Commission of
rules for an industry, and upon such reasonable public notice as to the Commission
seems appropriate, further opportunity shall be afforded by the Commission to all
interested persons, corporations or other organizations, including consumers, to submit
in writing relevant suggestions or objections and to appear and be heard at a
designated time and place.

(g) Promulgation of rules.--When trade practice rules shall have been finally
approved and received by the Commission, they shall be promulgate d by official order
of the Commission and published, pursuant to law, in the Federal Register. Said rules
shall become operative thirty (30) days from date of promulgation or at such other time
as may be specified by the Commission. Copies of the final rules shall be made
available at the office of the Commission. Under the procedure of the Commission a
copy of the trade practice rules as promulgated by the Commission is sent to each
member of the industry whose name and address is available, together with an
acceptance form providing Opportunity to such member to signify his intention to
observe the rules in the conduct of his business.
(h) Violations.--Complaints as to the use, by any person, corporation or other
organization, of any act, practice or method inhibited by the rules may

116

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

be made to the Commission by any person having information thereof. Such
complaints, if warranted by the facts and the law, will receive the attention of the
Commission in accordance with the law. In addition, the Commission may act upon
its own motion in proceeding against the use of any act, practice or method contrary
to law.
RULE XXVIII. CONFIDENTIAL RECORDS AND INFORMATION
The records and files of the Commission, and all documents, memoranda,
correspondence, exhibits, and information of whatever nature, other than the
documentary matters above described, coming into the possession or within the
knowledge of the Commission or any of its officers or employees in the discharge of
their official duties, are confidential, and none of such material or information may be
disclosed, divulged; or produced for inspection or copying except under the following
circumstances:
1. Information concerning the activities of the Commission will be released from
time to time under the direction or pursuant to the authority of the Commission.
2. In proceedings instituted by the issuance of formal complaint, the pleadings,
transcript of testimony, exhibits, and all documents received in evidence or made a
part of the record therein shall be available for inspection and copying by the public
at the convenience of the Commission.
3. Documents, records, and reports made public by the Commission, including
stipulations to cease and desist, certain trade practice conference records, and certain
papers filed under the Wool Products Labeling Act shall be available for inspection
and copying at the convenience of the Commission.
4. Upon good cause shown, the Commission may by order direct that certain records,
files, papers, or information be disclosed to a particular applicant.
(a) Application by a member of the public for such disclosure shall be in writing,
under oath, setting forth (1) the interest of the applicant in the subject matter; (2) a
description of the specific information, files, documents, or other material inspection
of which is requested; (3) whether copies are desired; and (4) the purpose for which
the information or material, or copies, will be used if the application is granted. Upon
receipt of such an application the Commission will take such action thereupon as it
shall deem expedient in the public interest.
(b) In the event that confidential material is desired for inspection, copying, or use
by some agency of the Federal or a State Government, a request therefor may be made
by the administrative head of such agency. Such requests shall be in writing, and shall
describe the information or material desired its relevancy to the work and function of
such agency and, if the production of documents or records or the taking of copies
thereof is asked, the use which is intended to be made of them. The Commission will
consider and act upon such requests, having due regard to the public interest and
questions of expediency.
In cases in which an officer or employee of the Commission has been lawfully
served with a subpoena duces tecum, material designated herein as confidential shall
be produced only when and as authorized, by the Commission. Services of such a
subpoena shall immediately be reported to the Commission with a statement of all
relevant facts. The Commission will thereupon enter such order or give such instructions as it shall deem advisable in the premises. If the officer or employee so served
has not received instructions from the Commission prior to the return date of the
subpoena, he shall appear in response thereto and respectfully decline to produce the

documents or records subpoenaed (pointing out that he is not permitted to do so under
this rule), and request a continuance pending action by or instructions from the
Commission. If, notwithstanding, the court or other body orders the production of any
of the material subpoenaed, the officer or employee shall immediately report the facts
to the Commission.
STATEMENT OF POLICY
STATUS OF APPLICANT OR COMPLAINANT
The so-called “applicant” or complaining party has never been regarded as a party
in the strict sense. The Commission acts only in the public interest. It has always been
and now is the rule not to publish or divulge the name of an applicant or complaining
party, and such party has no legal status before the Commission except where allowed
to intervene as provided by the statute.

INVESTIGATIONS BY THE COMMISSION, 1915-42

117

POLICY AS TO PRIVATE CONTROVERSIES
It is the policy of the Commission not to institute proceedings against alleged unfair
methods of competition or unfair or deceptive acts or practices where the alleged
violation of law is a private controversy redressable in the courts, except where said
practices tend to affect the public. In cases where the alleged injury is one to a
competitor only and is redressable in the courts by an action by the aggrieved
competitor and the interest of the public is not involved, the proceeding will not be
entertained.
SETTLEMENT OF CASES BY STIPULATION
Whenever the Commission Shall have reason to believe that any person has been or
is using unfair methods of competition or unfair or deceptive acts or practices in
commerce, and that the interest of the public will be served by so doing, it may
withhold Service of complaint and extend to the person opportunity to execute a
stipulation satisfactory to the Commission, in which the person, after admitting the
material facts, promises and agrees to cease and desist from and not to resume such
unfair methods of competition or unfair or deceptive acts or practices. All such
stipulations shall be matters of public record, and shall be admissible as evidence of
prior use of the unfair methods of competition or unfair or deceptive acts or practices
involved in any subsequent proceeding against such person before the Commission.
It is not the policy of the Commission to thus dispose of matters involving intent to
defraud or mislead; false advertisement of food, drugs, devices, or cosmetics which are
inherently dangerous or where injury is probable; suppression or restraint of
competition through conspiracy or monopolistic practices; violations of the Clayton
Act; violations of the Wool Products Labeling Act of 1939 or the rules promulgated
thereunder; or where the Commission is of the opinion that such procedure will not be
effective in preventing continued use of the unlawful method, act, or practice. The
Commission reserves the right in all cases, for any reasons which it regards as
sufficient, to withhold this privilege.
REPORTS OF TRIAL EXAMINERS
The policy of the Commission is that reports of trial examiners shall not be open to
public inspection or to publication until after the publication of the Commission’s
decisions in the cases in which such reports are made. During this time they are open
only to the Commission, to counsel and to parties respondent in such cases.
WOOL PRODUCTS LABELING ACT
In the handling of cases before the Commission arising under this act, the practice
and procedure of the Commission, insofar as applicable, will be as provided in cases
arising under the Federal Trade Commission Act.
INVESTIGATIONS BY THE COMMISSION, 1915-45
DESCRIPTIONS OF INQUIRIES INCLUDING TITLES OF PUBLISHED
REPORTS
Since its establishment in 1915, the Federal Trade Commission has conducted
numerous general inquiries which are alphabetically listed and briefly described in the

following pages under more than 125 different headings.1 They were made at the
request of the President, the Congress, the Attorney General, establishments such as
the War Production Board, the Office of Price Administration, or other Government
agencies, or on motion of the Commission pursuant to the Federal Trade Commission
Act.
Reports on these inquiries in many instances have been published as Senate or
House documents or as Commission publications. Printed documents, unless indicated
as being out of print, 2 may be purchased from the Superintendent of Documents,
Government Printing Office, Washington, D. C. Processed publications are available
without charge from the Federal Trade Commission while the supply lasts.
Agencies initiating or requesting investigations are indicated in parentheses in the
headings below. For wartime inquiries, 1917-18 and 1941-45, see paragraphs headed
“Wartime.”
1 The wartime cost-finding inquires, 1917-1918 (p. 109), include approximately 370 separate
investigations.
2 documents out of print (designated “o. p.”) are available in depository libraries.

118

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Accounting Systems (F. T. C.).--Pointing the way to a general improvement in
accounting practices, the Commission published Fundamentals of a Cost System for
Manufacturers (H. Doc. 1356, 64th, 31 p., 7/1/10) and A System of Accounts for Retail
Merchants (19 p., o. p., 7/15/16).
Accounting Systems.--See Distribution Cost Accounting, arid Production Cost
Accounting.
Agricultural Implements.--See Farm Implements.
Agricultural Implements and Machinery (Congress).3--Prices of farm products
reached record lows in 1932 but prices of many farm implements, machines, and repair
parts maintained high levels resulting in widespread complaints in the next few years.
The Commission investigated the situation (Public Res. 130, 74th, 6/24/36) and,
following submission of its report, Agricultural Implement and Machinery Industry
(H. Doc. 702, 75th, 1,176 p., 6/6/38), the industry made substantial price reductions.
The report criticized certain competitive practices on the part of the dominant
companies which the companies later promised to remedy. It showed, among other
things, that a few major companies had maintained a concentration of control which
resulted in large part from their acquisition of the capital stock or assets of competitors
prior to enactment of the Clayton Antitrust Act in 1914 and thereafter from their
purchase of assets of competitors rather than capital stock. 4
Agricultural Income (Congress).--Investigating a decline in agricultural income
and Increases or decreases in the income of corporations manufacturing and
distributing wheat, cotton, tobacco, livestock, milk, and potato products (Public Res.
61, 74th, 8/27/25), and table and juice grapes, fresh fruits and vegetables (Public Res.
112, 74th, 6/20/36), the Commission made recommendations concerning, among other
things, the marketing of commodities covered by the inquiry; corporate consolidations
and mergers;5 unbalanced agricultural-industrial relations; cooperative associations;
production financing; transportation; and terminal markets. Its recommendations for
improvement of the Perishable Agricultural Commodities Act were adopted by
Congress in amending that act (Public 828, 75th) in 1937. [Report of the F. T. C. on
Agricultural Income Inquiry, Part I, Principal Farm Products, 1,134 p., 3/2/37
(summary, conclusions and recommendation, S. Doc. 54, 75th, 40 p.); Part II, Fruits,
Vegetables and Grapes, 906 p., 6/10/37; Part III, Supplementary Report, 154 p.,
11/8/37; and interim reports of 12/26/35 (H. Doc. 380, 74th, 6 p.), and 2/1/37 (S. Doc.
17, 75th, 16 p.)]
Agricultural Prices.--See Price Deflation.
Aluminum, Foundries Using (W. P. B.), Wartime, 1942-43.--Details were obtained for the War Production Board, at Its request, from aluminum foundries
throughout the U. S. covering their operations for May 1942 and their compliance with
W. P. B. Supplementary Orders m-1-d, m-1-c and m-1-f.
Bakeries and Bread.--See Food.
Beet Sugar.--See Food--Sugar.
Calcium Arsenate (Senate).--High prices of calcium arsenate, a poison used to
destroy the cotton boll weevil (S. Res. 417, 67th, 1/23/23), appeared to be due to
sudden Increased demand rather than trade restraints (Calcium Arsenate Industry, S.
Doc. 345, 67th, 21 p., 3/3/23).
Cement (Senate).--Inquiry into the cement industry’s competitive conditions and
distributing processes (S. Res. 448, 71st, 2/16/31 showed that rigid application of the
multiple basing-point price system 6 tended to lessen price competition and destroy the
value of sealed bids; concerted activities of manufacturers and dealers strengthened
the system’s price effectiveness; and dealer associations’ practices were designed to

restrict sales to recognized “legitimate” dealers (Cement Industry. S, Doc. 71, 73d, 160
p., 6/9/33).
Chain Stores (Senate).--Practically every phase of chain-store operation was
covered (S. Res. 224, 70th, 5/12/28), including cooperative chains, chain-store
manufacturing and wholesale business, leaders and loss leaders, private brands,
3 Inquiries desired by either House of Congress are now undertaken by the Commission as a result of
concurrent resolutions of both Houses. For further explanation, see footnote on p.2.
4 F. T. C. recommendations that section 7 of the Clayton Act be amended to declare unlawful the
acquisition of corporate assets under the same conditions that acquisition of corporate stock has been
unlawful since 1914, are discussed in Chain Stores--Final Report on the Chain Store Investigation (S.
Doc. 4, 74th, 12/14/34), p.96: Summary Report on Conditions- With Respect to the Sale and Distribution
of Milk and Dairy Products (H. Doc. 94, 75th 1/4/37), p.38: Report of the F. T. C. on Agricultural Income
Inquiry, Part I (3/2/37), p.26; Agricultural Implement and Machinery Industry (H. Doc. 702, 75th. 6/6/39),
p.1038; and F. T. C. Annual Reports: 1938, pp. 19 and 29; 1939, p. 14; 1940, p. 12;1941, p. 19: 1942,
p.9; 1943, p.9; 1944, p.7.
5 See footnote 4, above.
6 Basing-point systems are also discussed in the published reports listed under “Price Bases,” “Steel
Code.” and “Steel Sheet Piling” herein.

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

119

short weighing and overweighing, and sales, costs, profits, wages, special discounts
and allowances, and prices and margins of chain and independent grocery and drug
distributors in selected cities. (For subtitles of 33 reports published under the general
title, Chain Stores, 1931-33, see F. T. O. Annual Report, 1941, p.201.)
In the Final Report on the Chain-Store Investigation (S. Doc. 4, 74th, 110 p., o. p.,
12/14/34), legal remedies available to combat monopolistic tendencies In chain-store
development were discussed.7 The Commission ‘s recommendations pointed the way
to subsequent enactment of the Robinson-Patman Act (1936) prohibiting price and
other discriminations, and the Wheeler-Lea Act (1938) which amended the Federal
Trade Commission Act so as to broaden the prohibition of unfair methods of
competition in section 5 to include unfair or deceptive acts or practices in interstate
commerce.
Coal (Congress and F. T. C.), Wartime, 1917-18, Etc.--From 1916 through the
first World War period and afterward, the Commission at different times investigated
anthracite and bituminous coal prices and the coal Industry’s financial condition.
Resulting cost and price reports are believed to have substantially benefited the
consumer. Among the published reports were: Anthracite Coal Prices, preliminary (S.
Doc. 19, 65th, 4 p., o. p., 5/4/17); Preliminary Report by the F. T. C on the Production
and Distribution of Bituminous Coal (H. Doc. 152, 65th, 8 p., o. p., 5/19/17);
Anthracite and Bituminous Coal Situation, summary (H. Doc. 193, 65th, 29 p., o. p.,
6/19/17); and Anthracite and Bituminous Coal (S. Doc. 50, 65th, 420 p.. o. p.,
6/19/17)--pursuant to S. Res. 217, 64th, 6/22/16: H. Res. 352, 64th, 8/18/16, and S.
Res. 51, 65th, 5/1/17; Washington, D. C., Retail Coal Situation (5 p., release,
processed, o. p., 8/11/17)--pursuant to F. T. C. motion: Investment and Profit in SoftCoal Mining (two parts, 5/31/22 and 7/6/22, 218 p., S. Doc. 207, 67th)--pursuant to F.
T. C. motion; and Report of the F. T. C. on Premium Prices of Antliracite (97 p.,
7/0/25)--pursuant to F. T. C. motion.
Coal, Cost of Production (F. T. C.), Wartime, 1917-18.--President Wilson fixed
coal prices by Executive order under the Lever Act (1917) on the basis of information
furnished by the Commission. For use of the U. S. Fuel Administration in continuing
price control, the Commission compiled monthly cost production reports, collecting
cost records for 1917-18 for about 99 percent of the anthracite and 95 percent of the
bituminous coal production (Cost Reports of the F. T. C. Coal, 6/30/19, summarized
for principal coal-producing States or regions: (1) Pennsylvania, bituminous, 103 p.;
(2) Pennsylvania, anthracite, 145 p., o. p.; (3) Illinois, bituminous, 127 p.; (4)
Alabama, Tennessee, and Kentucky, bituminous, 210 p.; (5) Ohio, Indiana, and
Michigan, bituminous, 288 p.; (6) Maryland, West Virginia, and Virginia, bituminous
286 p.; and (7) trans-Mississippi States, bituminous, 459 p.)
Coal, Current Monthly Reports (F. T. C.).--The Commission (December 1919)
initiated a system of current monthly returns from the soft coal Industry similar to
those compiled during the World War, 1917-18 (Coal-Monthly Reports on Cost of
Production, 4/20/20 to 10/30/20, Nos. 1 to 6, and two quarterly reports with revised
costs, 8/25/20 and 12/6/20, processed, o. p.). An injunction to prevent the calling for
the monthly reports (denied about seven years later) ]ed to their abandonment.
Combed Cotton Yarns.--See Textiles.
Commercial Bribery (F. T. C.).--Investigating the prevalence of bribery of
customers’ employees as a means of obtaining trade, the Commission published A
Special Report on Commercial Bribery (H. Doc. 1107, 65th, 3 p., o. p., 5/15/18),
recommending legislation striking at this practice; Commercial Bribery (S. Doc.

unnumbered, 65th, 36 p., o. p., 8/22/18); and Commercial Bribery (S. Doc. 258, 66th,
7 p., o. p., 3/18/20.
Cooperation in American Export Trade.--See Foreign Trade.
Cooperation in Foreign Countries (F. T. C.) .--Inquiries made by the Commission
regarding the cooperative movement in 15 European countries resulted in a report,
Cooperation in Foreign Countries (S. Doc.171, 68th, 202p.,o.p., 11/29/24),
recommending further development of cooperation in the U. S.
Cooperative Marketing (Senate).--This inquiry (S. Res. 34, 69th, 3/17/25) covered
the development of the cooperative movement in the U. S. and illegal interferences
with the formation and operation of cooperatives; and a comparative study of costs,
prices, and marketing methods (Cooperative Marketing, S. Doc. 95, 70th, 721 p., o.
p., 4/30/28).
7

See footnote 4, p. 107.

120

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Copper.--See Wartime Cost Finding, 1917-18.
Corporation Reports.--See Industrial Corporation Reports.
Cost Accounting.--See Accounting Systems.
Cost of Living (President), Wartime, 1917-18.--Delegates from the various States
met in Washington, April 30 and May 1,1917, at the request of the Federal Trade
Commission, and considered the rapid rise of wartime prices and the plans then being
made for the Commission’s general investigation of foodstuffs. [See Foods
(President), Wartime, 1917-18, herein.] Proceedings of the conference were published
(High Cost of Living, 119 p., o. p.).
Cost of Living (President).--President Roosevelt, in a published letter (11/16/37),
requested the Commission to investigate living costs. The Commis sion (11/20/37)
adopted a resolution undertaking the inquiry and a few months thereafter submitted a
confidential report to the President.
Cotton Industry.--See Textiles.
Cottonseed Industry (House).--Investigating alleged price fixing (H. Res. 439,
69th, 3/2/27), the Commission reported evidence of cooperation among State
associations but no indication that cottonseed crushers or refiners had fixed prices in
violation of the antitrust laws (Cottonseed Industry, H. Doc. 193, 70th, 37 p., 3/5/28).
Cottonseed Industry (Senate).--Two resolutions (S. Res. 136, 10/21/29, and S. Res.
147, 11/2/29 71st) directed the Commission to determine whether alleged unlawful
combinations of cottonseed oil mill corporations sought to lower and fix prices of
cottonseed and to sell cottonseed meal at a fixed price under boycott threat; and
whether such corporations acquired control of cotton gins to destroy competitive
markets and depress or control prices paid to seed producers (Investigation of the
Cottonseed Industry, preliminary report, S. Doc. 91, 71st, 4 p., o. p., 2/28/30, and final
report, 207 p., with 11 vols. testimony, S. Doc. 209, 71st, 5/19/33.)
Distribution Cost Accounting (F. T. C.). --To provide a guide for current
legislation and determine ways for improving accounting methods, the Commission
studied distribution cost accounting in connection with selling, warehousing, handling,
delivery, credit and collection (Case Studies in Distribution Cost Accounting for
Manufacturing and Wholesaling, H. Doc. 287, 77th, 215 p., 6/23/41).
Distribution.--See Foods-Mass Foods Distributors.
Distribution.--See Millinery Distribution.
Distribution Methods and Costs (F. T. C. and O. P. A.), Wartime, 1941-42.-Involving methods and costs of interstate distribution of certain commodities, this
inquiry (F. T. C. Res., 6/27/40) was completed and will be reports in published from,
although special reports of the 1941 a study of distribution of some 20 commodity
groups were made for the confidential use of O. P. A. and other war agencies. (See
p. 19.)
Du Pont Investments (F. T. C.).--The Report of the F. T. C. on Du Pont Investments (F. T. C. motion 7/29/27; report, 46 p., processed, 2/1/29) discussed reported
acquisitions by E. I. du Pont de Nemours & Co. of U.S. Steel Corp. stock, together
with previously reported holdings in General Motors Corp.
Electric and Gas Utilities, and Electric Power.--See Power.
Farm Implements (Senate), Wartime, 1917-18.--The Report of the F. T. C. on the
Causes of High Prices of Farm Implements (inquiry under S. Res. 223, 65th, 5/13/18;
report, 713 p., o. p., 5/4/20) disclosed numerous trade combinations for advancing
prices and declared the consent decree for dissolution of International Harvester Co.
to be inadequate. The Commission recommended revision of the decree and the
Department of Justice proceeded to that end.

Farm Implements.--See Agricultural Implements and Machinery, and Independent
Harvester Co.
Feeds (Senate).--Seeking to determine whether purported combinations in restraint
of trade existed (S. Res. 140, 66th, 7/31/19), the Commission found that although some
association activities were in restraint of trade, there were no substantial antitrust law
violations (Report of the F. T. C. on Commercial Feeds, 206 p., 3/29/21).
Fertilizer (Senate).--Begun by the Commissioner of Corporations 8 (S. Res. 487,
62d, 3/1/13), this inquiry disclosed extensive use of bogus independent fertilizer
companies for competitive purposes (Fertilizer Industry, S. Doc. 551, 64th, 269 p., o.
p., 8/19/16). Agreements for abolition of such unfair competition were reached.
8 The Commission was created September 26, 1914, upon passage of the Federal Trade Commission
Act. sec. 3 of which provided that “all pending investigations and proceedings of the Bureau of
Corporations [of the Department of Commerce] shall be continued by the Commission.”

INVESTIGATIONS BY THE COMMISSION, 1915-42

121

Fertilizer (Senate).--A second fertilizer inquiry (S. Res. 307, 67th, 6/17/22)
developed that active competition generally prevailed in that industry in the U. S.,
although in some foreign countries combinations controlled certain important raw
materials. The Commission recommended improved agricultural credits and more
extended cooperation by farmers in buying fertilizer (Fertilizer Industry, S. Doc. 347,
67th, 87 p., o. p., 3/3/23).
Fertilizer and Chemicals (O. P. A.), Wartime, 1941-42.--A study of costs, prices
and profits in the fertilizer and related products industries (O. P. A. request, June
1942) was undertaken in connection with nine important companies in the phosphate
rock mining industry. The study will also embrace costs, profits, and prices in the
production and sale of superphosphates, organic nitrates, sulphuric acid, and mixed
fertilizers. (See p. 17.)
Flags (Senate), Wartime, 1917-18--Unprecedented increases in the prices of U. S.
flags in 1917, due to wartime demand, were investigated (S. Res. 35, 65th, 4/16/17).
The inquiry was reported in Prices of American Flags (S. Doc. 82, 65th, 6 p., o. p.,
7/26/17).
Flour Milling.--See Food, below.
Food (President), Wartime, 1917-18.--President Wilson, as a wartime emergency
measure (2/7/17), directed the Commission “to investigate and report the facts relating
to the production, ownership, manufacture, storage, and distribution of foodstuffs” and
“to ascertain the facts bearing on alleged violations of the antitrust acts.” Two major
series of reports related to meat packing and the grain trade with separate inquiries into
flour milling, canned vegetables and fruits, canned salmon, and related matters, as
listed below.
Food (President) Continued--Meat Packing.--Food Investigation-Report of the F.
T. C. on the Meat-Packing Industry was published in six parts: I. Extent and Growth
of Power of the Five Packers in Meat and Other Industries (6/24/19, 574, p., o. p.); II.
Evidence of Combination Among Packers (11/25/18, 294 p., o. p.); III. Methods of the
Five Packers in Controlling the Meat-Packing Industry (6/28/19, 325 p., o. p.); IV. The
Five Large Packers in Produce and Grocery Foods (6/30/19, 390 p., o. p.); V. Profits
of the Packers (6/28/19,110 p., o. p.); VI. Cost of Growing Beef Animals, Cost of
Fattening Cattle, and Cost of Marketing Livestock (6/30/19, 183 p., o. p.); and
summary (H.- Doc. 1297, 65th, 51 p., o. p., 7/3/18).
The reports first led to antitrust proceedings against the Big Five Packers, resulting
in a consent decree (Supreme Court of the D C., 2/27/20), 9 which had substantially
the effect of Federal legislation in restricting their future operations to certain lines of
activity. As a further result of the investigation, Congress enacted] the Packers and]
Stockyards Act (1921), adopting the Commission’s recommendation that the packers
be divorced from control of the stockyards. (The meat-packing industry is further
referred to under Meat Packing Profit Limitations, p.112).
Food (President) Continued-Grain Trade.--Covering the industry from country
elevator to central market, the Report of the F. T. C. on the Grain Trade was published
in seven parts: I. Country Grain Marketing (9/15/20, 350 p., o. p.); II. Terminal Grain
Markets and Exchanges (9/15/20, 333 p., o. p.-); III. Terminal Grain Marketing
(12/21/21, 332 p., o. p.); IV. Middlemen’s Profits and Margins (9/26/23, 21 5 p., o. p.);
V. Future Trading Operations in Grain (9/15/20, 347 p., o. p.); VI. Prices of Grain
and Grain Futures (9/10/24, 374 p.); and] VII. Effects of Future Trading (6/25/26, 419
p.). The investigation as reported in Vol. V, and testimony by members of the

Commission’s staff (U. S. Congress House Committee on Agriculture, Future Trading,
hearings, 67th, April 25-May 2, 1921) was an important factor in enactment of the
Grain Futures Act (1921). (Further reference to the grain trade is made under Grain
Elevators, p. 112; Grain Exporters, p.112; and Grain Wheat Prices, p.112.)
Food (President) Continued--Bakeries and Flour Milling.--One F.T.C. report was
published by the Food] Administration (U. S. Food Administration, Report of the F.
T. C. on Bakery Business in U.S., pp.5-13, o. p., 11/3/17.) Other reports were: Food
Investigation, Report of the F. T. C. on Flour Milling and Jobbing (4/4/18, 27 p., o.
p.) and Commercial Wheat Flour Milling (9/15/20.118 p., o. p.).
9 The legal history of the consent decree and a summary of divergent economic interests involved in
the question of packer participation in unrelated lines of food products were set forth by the Commission
in Packer Consent Decree (S. Doc. 219, 68th, 44 p., o. p., 2/20/25), prepared pursuant to S. Res. 278,
68th, 12/8/24.

122

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Food (President) Continued--Canned Foods,10 Private Car Lines, Wholesale
Food Marketing.--Under the general title Food Investigation were published Report
of the F. T. C. on Canned Foods-General Report and Canned Vegetables and Fruits
(5/18/18, 103 p., o. p.); Report of the F. T. C. on Canned Foods-Canned Salmon
(12/27/18, 83 p., o. p.); Report of the F. T. C. on Private Car Lines, regarding
transportation of meats, fruits, and vegetables (6/27/19, 271 p., o. p.); and Report of
the F. T. C. on Wholesale Marketing of Food (6/30/19, 268 p., o. p.),. which
recommended that a wholesale dealer in perishable food products should be required
to procure a Federal license and that Federal inspection and standards should be
provided. Provisions in accordance with these recommendations were incorporated]
in the Perishable Agricultural Commodities Act (1930).
Food--Biscuits and Crackers (O. P. A.), Wartime, 1941-42.--In the interest of the
low income consumer, for whom it was deemed necessary the price of bread should
be held at a minimum, the Commission investigated costs, prices and profits of 60
representative bread-making companies, conveying its findings to O. P. A. (Jan. 1942)
in an unpublished report. (See p. 16.)
Food--Bread and Flour (Senate).--Reports on this inquiry (S. Res. 163, 68th,
2/26/24) were: Competitive Conditions in Flour Milling (S. Doc. 97, 70th, 140 p., o.
p., 5/3/26); Bakery Combines and Profits (S. Doc. 212, 69th, 95 p., 2/11/27);
Competition and Profits in Bread and Flour (S. Doc. 98, 70th, 509 p., 1/11/28); and
Conditions in the Flour Milling Business, supplementary (S. Doc. 96, 72(1, 26 p.,
5/28/32).
Food--Flour Milling (Senate).--This study of costs, profits, and other factors (S.
Res. 212, 67th, 1/18/22) was reported] in Wheat Flour Milling Industry (S. Doc. 130,
68th, 130 p., o. p., 5/16/24).
Food--Grain Elevators (F. T. C.), Wartime, 1917-18.--In view of certain bills
pending before Congress with reference to regulation of the grain trade, the
Commission, in a preliminary report, Profits of Country and Terminal Grain Elevators
(S. Doc. 40, 67th, 12 p., o. p., 6/13/21), presented certain data collected during its
inquiry into the grain trade ordered by the President (see p. 111).
Food--Grain Exporters (Senate).--The low prices of export wheat in 1921 gave
rise to this inquiry (S. Res. 133, 67th, 12/22/21) concerning harmful speculative price
manipulations on the grain exchanges and alleged conspiracies among country grain
buyers to agree on maximum purchasing prices. The Commission recommended
stricter supervision of exchanges and additional storage facilities for grain not
controlled by grain dealers (Report of the F. T. C. on Methods and Operations of
Grain Exporters, 2 vols., 387 p., 5/16/22 and 6/18/23).
Food--Grain, Wheat Prices (President).--An extraordinary decline of wheat prices
was investigated (President Wilson’s directive, 10/12/20) and found to be due chiefly
to abnormal market conditions (Report of the F. T. C. on Wheat Prices for the 1920
Crop, 91 p., 12/13/20).
Food--Mass Foods Distributors (F. T. C.).--The system of delivering foods to
large chain store warehouses and the older system of delivery to individual retail stores
were compared from an economic viewpoint (F. T. C., Res., 4/20/41).
Food--Meat Packing Profit Limitations (Senate), Wartime, 1917-18.--Following
an inquiry. (S. Res. 177, 66th, 9/3/19) involving the wartime control of this business

as established by the U. S. Food Administration in 1917-18, the Commission
recommended greater control and lower maximum profits (Maximum Profit Limitation
on Meat Packing Industry, S. Doc. 110, 66th, 179 p., o. p., 9/25/19).
Food--Milk and Milk Products (Senate), Wartime, 1917-18.--Covering an inquiry
(S. Res. 431, 65th, 3/3/19) into fairness of milk prices to producers and of canned milk
prices to consumers, the Report of the F. T. C. on Milk and Milk Products 1914-18
(6/6/21, 234 p.) showed a marked concentration of control and questionable practices
many of which later were recognized by the industry as being unfair.
Food--Milk and Dairy Products (House).--Competitive conditions in different
milk-producing areas were investigated (H. Con. Res. 32, 73d, 6/15/34). Results of
the inquiry were published in seven volumes: Report of the F. T. C. on the Sale and
Distribution of Milk Products, Connecticut and Philadelphia Milk-sheds (H. Doc. 152,
74th, 901 p., 4/5/35); Report of the F. T. C. on the Sale and Distribution of Milk and
Milk Products (Connecticut and Philadelphia milksheds,
10 In connection with its wartime cost finding inquiries, 1917-18. p.109 herein, the Commission
published Report of the F. T. C. on Canned Foods) 1918--Corn, Peas, String Beans, Tomatoes, and
Salmon (86 p., 11/21/21).

INVESTIGATIONS BY THE COMMISSION, 1915-42

123

interim report, H. Doc. 387, 74th, 125 p., 12/31/35); Chicago Sales Area (H. Doc. 451,
74th, 103 p., o. p 4/15/36); Boston, Baltimore, Cincinnati, St. Louis (H. Doc. 501,
74th, 243 p., 674/36); Twin City Sales Area (H. Doc. 506, 74th, 71 p., 6/13/36); and
New York Milk Sales Area (H. Doc. 95, 75th, 138 p., o. p., 9/30/36).-The Commission
reported that many of the industry’s problems could only be dealt with by the States
and recommended certain legislation and procedure, both State and Federal (Summary
Report on Conditions With Respect to the Sale and Distribution of Milk and Dairy
Products, H. Doc. 94, 75th, 39 p., o. p., 1/4/37). Legislation has been enacted in a
number of States carrying into effect all or a portion of the Commission’s
recommendations.
Food--Peanut Prices (Senate).--An alleged price-fixing combination of peanut
crushers and mills was investigated (S. Res. 139, 71st, 10/22/29). The Commission
found that an industry-wide decline in prices of farmers’ stock peanuts during the
business depression was not due to such a combination, although pricing practices of
certain mills tended to impede advancing and to accelerate declining prices (Prices and
Competition Among Peanut Mills, S. Doc. 132, 72d, 78 p., 6/30/32).
Food--Raisin Combination (Attorney General).--Investigating allegations of a
combination among California raisin growers (referred to F. T. C. 9/30/19), the
Commission found the enterprise not only organized in restraint of trade but conducted
in a manner threatening financial disaster to the growers. The Commission
recommended changes which the growers adopted (California Associated Raisin Co.,
26 p., processed o. p., 6/8/20).
Food--Southern Livestock Prices (Senate).--Although the low prices of southern
livestock in 1919 gave rise to a belief that discrimination was being practiced, a
Commission investigation (S. Res. 133, 66th, 7/25/19) revealed the alleged
discrimination did not appear to exist (Southern Livestock Pr ices, S. Doc. 209, 66th,
11 p., o. p, 2/2/20).
Food--Sugar (House).--An extraordinary advance in the price of sugar in 1919 H.
Res. 150, 66th, 10/1/19) was found to be due chiefly to speculation and hoarding. The
Commission made recommendations for correcting these abuses Report of the F. T. C.
on Sugar Supply and Prices, 205 p., 11/15/20).
Food-Sugar, Beet (F. T. C.).--Initiated by the Commissioner of Corporation,11 but
completed by the F. T. C., this inquiry dealt with the cost of growing beets and the cost
of beet-sugar manufacture (Report on the Beet Sugar Industry in the U. S., H. Doc.
158, 65th, 164 p., 6. p., 5/24/17).
Foreign Trade--Antidumping Legislation (F. T. C.).--To develop information for
use of Congress in its consideration of amendments to the antidumping laws the
Commission studied recognized types of dumping and provisions for preventing the
dumping of goods from foreign countries (Antidumping Legislation and other Import
Regulations in the United States and Foreign Countries, S. Doc. 112, 73d, 100 p.,
1/11/34; supplemental report, 111 p., processed, 6/27/38).
Foreign Trade--Cooperation in American Export Trade (F. T. C.) .--This inquiry
related to competitive conditions affecting Americans in international trade. The
Export Trade Act, also known as the Webb-Pomerene Law, authorizing the association
of U. S. manufacturers for export trade, was enacted as a result of Commission
recommendations (Cooperation in American Export Trade, 2 vols., 984 p., o. p.,
6/30/16; also summary, S. Doc. 426, 64th, 7 p., o. p., 5/2/16; and conclusions, 1916,
14 p., o. p.).

Foreign Trade--Cotton Growing Corporation (Senate).--The report of an inquiry
(S. Res. 317, 68th, 1/27/25) concerning the development of this British company,
Empire Cotton Growing Corporation (S. Doc. 226, 68th, 30 p., o. p., 2/28/25), showed
there was then little danger of serious competition with the American grower or of a
possibility that the United States would lose its position as the largest producer of raw
cotton.
Gasoline.--See Petroleum.
Grain.--See Food.
Guarantee Against Price Decline (F. T. C.).--Answers to a circular letter
(12/26/19) calling for information and opinions on this subject were published in
Digest of Replies in Response to an Inquiry of the F. T. C. Relative to the Practice of
Giving Guarantee Against Price Decline (68 p., 5/27/20).
House Furnishings (Senate).--This inquiry (S. Res. 127, 67th, 1/4/22) resulted in
three volumes showing concerted efforts to effect uniformity of prices
11

See footnote 8, p. 120.

124

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

in some lines (Report of the F. T. C. on House Furnishing Industries, 1018 p., 1/17/23,
10/1/23, and 10/6/24).
Household Furniture (O. P. A.), Wartime, 1941-42.--Costs, prices, and profits of
67 representative furniture companies were studied to determine whether, and to what
extent, price increases were justified.- A study was also made to determine whether
price-fixing agreements existed and whether wholesale price increases resulted from
understandings in restraint of trade. Confidential reports were transmitted to O. P. A.
in Sept. 1941.
Independent Harvester Co. (Senate), Wartime, 1917-18.--After investigation (S.
Res. 212, 65th, 3/11/18) of the organization and methods of operation of the company
which had been formed several years before to compete with the “harvester trust,” but
which had passed into receivership, the F. T. C. Report to the Senate on the
Independent Harvester Co. (5 p., release, processed, o. p., 5/15/18) showed the
company’s failure was due to mismanagement and insufficient capital.
Industrial Corporation Reports (F. T. C.), Wartime, 1941-42.--The Commission
obtained corporation financial reports for 1939 and 1940. It published in combined
form significant economic facts developed in the 1939 series relating to 76 industries
which embraced 780 corporations (Industrial Corporation Reports, 77 vols., incl.
summary, 10/15/40 to 6/30/41, approximately 1,500 pp., processed; titles listed in F.
T. C. Annual Report, 1941, p. 24). In 1939 these corporations had an average total
investment (after deduction of reported appreciation of assets) of more than
$28,000,000,000. The 1940 series, coordinated with wartime work for other
Government agencies, was expanded to cover 4,500 corporations representing
consolidated operations of more than 7,000 corporations operating in 86 principal
strategic materials industries and to provide O. P. A. with approximately 12,000 annual
reports of earlier years and quarterly reports of subsequent operations. The 1940
series was prepared for the confidential use of war and other agencies of the
Government. (See p. 12.)
Leather and Shoes (F. T. C. and House), Wartime, 1917-18.--General complaint
regarding high prices of shoes led to this inquiry, which is reported in Hide and
Leather Situation, preliminary report (H. Doc. 857, 65th, 5 p., o. p., 1/23/18), and
Report on Leather and Shoe Industries (180 p., 8/21/19). A further study (H. Res. 217,
66th, 8/19/19) resulted in the Report of the F.- T. C. on Shoe and Leather Costs and
Prices (212 p., 6/10/21).
Lumber--Costs.--See Wartime Cost Finding, 1917-18.
Lumber Trade Associations (Attorney General).--The Commission’s extensive
survey of lumber manufacturers’ associations (referred to F. T. C. 9/4/19) resulted in
Department of Justice proceedings against certain associations for alleged antitrust law
violations. Documents published were: Report of the F. T. C. on umber
Manufacturers’ Trade Associations, incorporating regional reports of 1/10/21, 2/18/21,
6/9/21, and 2/15/22 (150 p., o. p.); Report of the F. T. C. on Western Red Cedar
Association, Lifetime Post Association, and Western Red Cedarmen’s Information
Bureau (22 p., 1/24/23), also known as Activities of Trade Associations and
Manufacturers of Posts and Poles in the Rocky Mountain and Mississippi Valley
Territory (S. Doc. 293, 67th, o. p.-); and Report of the F. T. C. on Northern Hemlock
and Hardwood Manufacturers Association (52 p., 5/7/23).
Lumber Trade Associations (F. T. C.).--Activities of five large associations were
investigated in connection with the Open-Price Associations inquiry (p.104) to bring

down to date the 1919 lumber association inquiry (Chap. VIII of Open-Price Trade
Associations, S. Doc. 226, 70th, 516 p., 2/13/29).
Mass Foods Distributors.--See Food.
Meat--Packing Profit Limitations.--See Food.
Metal-Working Machines, Invoicing and Distribution of (W. P. B.), Wartime,
1941-42.--A comprehensive picture of this industry at work during a representative
period was furnished WPB for its use as a result of a survey (referred to F.T.C., May
1942) of 406 manufacturers’ operations. Among detailed data obtained was a breakdown to show the number of machines shipped for use of the United Nations armed
forces and for other foreign and domestic uses. (See p. 12.)
Milk.--See Food.
Millinery Distribution (President).--This inquiry, requested by President
Roosevelt, embraced growth and development of syndicates operating units for retail
millinery distribution, the units consisting of lease departments in department or
specialty stores (Report to the President of the United States on Distribution Methods
in the Millinery Industry, 65 p., processed, 11/21/39).

INVESTIGATIONS BY THE COMMISSION, 1915-42

125

Motor Vehicles (Congress).--Investigating (Public Res. 87, 75th, 4/13/38)
distribution and retail sales policies of motor vehicle manufacturers and dealers, the
Commission found, among other things, a high degree of concentration and strong
competition; that many local dealers’ associations fixed prices and operated used-car
valuation or appraisal bureaus essentially as combinations to re strict competition; that
inequities existed in dealer agreements and in certain manufacturers’ treatment of
some dealers; and that some companies’ car finance plans developed serious abuses
(Motor Vehicle Industry, H. Doc. 468, 76th, 1077 p., 6/5/39). The leading companies
voluntarily adopted a number of the Com-mission’s recommendations as company
policies.
National Wealth and Income (Senate).--In 1922 the national wealth was estimated
(inquiry pursuant to S. Res. 451, 67th, 2/28/23) at $353,000,000,000 and the national
income in 1923 at $70,000,000,000 [National Wealth and Income (S. Doc. 126, 69th,
381 p., o. p., 5/25/26) and Taxation and Tax-Exempt Income (S. Doc. 148. 68th, 144
p., o. p., 6/6/24)].
Open-Price Associations (Senate).--An investigation (S. Res. 28, 69th, 3/17/25) to
ascertain the number and names of so-called open-price associations their importance
in industry and the extent to which members maintained uniform prices, was reported
in Open-Price Trade Associations (S. Doc. 226, 70th, 516 p., 2/13/29).
Packer Consent Decree.--See Food (President) Continued--Meat Packing.
Paperboard (O. P. A.), Wartime, 1941-42.--Costs, profits, and other financial data
regarding operations of 68 paperboard mills (O. P. A. request, 11/12/41) for use in
connection with price stabilization work, were transmitted to O. P. A. in a confidential
report (May 1942).
Paper--Book (Senate), Wartime, 1917-18.--This inquiry (S. Res. 269, 64th, 9/7/16)
resulted in proceedings by the Commission against certain manufacturers to prevent
price enhancement and the Commission recommended legislation to repress trade
restraints [Book Paper Industry-A Preliminary Report (S. Doc. 45, 65th, 11 p., o. p.,
6/13/17), and Book Paper Industry--Final Report (S. Doc. 79, 65th, 125 p., o.p.,
8/21/17)].
Paper--Newsprint (Senate), Wartime, 1917-18.--High prices of newsprint (S. Res.
177, 64th, 4/24/16) were shown to have been partly a result of certain newsprint
association activities in restraint of trade. Department of Justice proceedings resulted
in abolishment of the association and indictment of certain manufacturers. The
Commission for several years conducted monthly reporting of production and sales
statistics, and helped provide some substantial relief for smaller publishers in various
parts of the country. [Newsprint Pa per Industry, preliminary (S. Doc. 3, 65th, 12 p.,
o. p. 3/3/17); Report of the F. T. C. on the Newsprint Paper Industry (S. Doc. 49, 65th,
162 p., 6/13/17); and Newsprint Paper Investigation (in response to S. Res. 95, 65th,
6/27/17; S. Doc. 61, 65th, 8 p., o.p., 7/10/17)].
Paper-Newsprint (Senate).--The question investigated (S. Res. 337, 70th, 2/27/29)
was whether a monopoly existed among newsprint manufacturers and distributors in
supplying paper to publishers of small dailies and weeklies (Newsprint Paper Industry,
S. Doc. 214, 71st, 116 p. 6/30/30).
Paper--Newsprint (Attorney General).--The Commission investigated (inquiry
referred to F. T. C. 1/24/38) the manner in which certain newsprint manufacturers
complied with a consent decree entered against them (11/26/17) by the U. S. District
Court, Southern District of New York.

Peanut Prices.--See Food.
Petroleum and Petroleum Products, Prices (President and Congress).--At
different times the Commission has studied prices of petroleum and petroleum
products and issued reports thereon as follows: Investigation of the Price of Gasoline,
preliminary (S. Doc. 403, 64th, 15 p., o. p., 4/10/16) and Report on the Price of
Gasoline in 1915 (H. Doc. 74, 65th, 224 p., o. p., 4/11/17)--both pursuant to S. Res.
109, 63d, 6/18/13 12 and S. Res. 457, 63d, 9/28/14, which reports discussed high prices
and the Standard Oil companies’ division of marketing territory among themselves, the
Commission suggesting several plans for restoring effective competition; Advance in
the Prices of Petroleum Products (H. Doc. 801, 66th, 57 p., 6/1/20)--pursuant to H.
Res. 501, 66th, 4/5/20, in which report the Commission made constructive proposals
to conserve the oil supply; Letter of Submittal and Summary of Report on Gasoline
Prices in 1924 (24 p. processed, 6/4/24, and Cong. Record, 2/28/25, p. 5158)--pursuant
to request of President Coolidge, 2/7/24; Petroleum Industry--Prices, Profits and
Competition
12

See footnote 8, p. 120.

126

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

(S. Doc. 61, 70th, 360 p., 12/12/27)-pursuant to S. Res. 31, 69th, 6/3/36; Importation
of Foreign Gasoline at Detroit, Mich. (S. Doc. 206, 72d, 3 p., o. p., 2/27/33)--pursuant
to S. Res. 274 72d, 7/16/32; and Gasoline Prices (S. Doc. 178, 73d, 22 p., 5/10/34)pursuant to S. Res. 166, 73d, 2/2/34.
Petroleum Decree (Attorney General).--The Commission investigated (inquiry
referred to F. T. C. 4/16/36) the manner in which a consent decree entered (9/15/30)
against Standard Oil Co. of California, Inc., and others, restraining them from
monopolistic practices, was being observed, and reported (4/2/37) to the Attorney
General.
Petroleum--Foreign Ownership (Senate) .--Inquiry was made (S. Res. 311, 67th,
6/29/22) into acquisition of extensive oil interests in the U. S. by the Dutch-Shell
organization, and into discrimination allegedly practiced in foreign countries against
American interests (Report of the F. T. C. on Foreign Ownership in the Petroleum
Industry 152 p., o. p., 2/12/23).
Petroleum Pipe Lines (Senate).--Begun by the Bureau of Corporations, 13 this
inquiry (S. Res. 109, 63d, 6/18/13) showed the dominating importance of the pipe lines
of the great midcontinent oil fields and reported practices of the pipe-line companies
which were unfair to small producers (Report on Pipe-Line Transportation of
Petroleum, 467 p., o. p., 2/28/16), some of which practices were later remedied by the
Interstate Commerce Commission.
Petroleum--Regional Studies (Senate and F. T. C.).--Reports published were:
Pacific Coast Petroleum Industry (two parts, 4/7/21 and 11/28/21, 538 p.)--pursuant
to S. Res. 138, 66th, 7/31/19; Reports of the F. T. C. on the Petroleum Industry of
Wyoming (54 p., o. p., 1/3/21)--pursuant to F. T. C. motion; Petroleum Trade in
Wyoming and Montana (S. Doc. 233, 67th, 4 p., 7/13/22)--pursuant to F. T. C. motion,
in which report legislation to remedy existing conditions was recommended; and
Report of the F. T. C. on Panhandle Crude Petroleum (Texas) (19 p. 2/8/28)--pursuant
to F. T. C. motion, 10/6/26 (in response to requests of producers of crude petroleum).
Power--Electric (Senate).--This inquiry (S. Res. 329, 68th, 2/9/25) resulted in two
reports, the first of which, Electric Power Industry--Control of Power Companies (S.
Doc. 213, 69th, 272 p., 2/21/27), dealt with the organization, control, and ownership
of commercial electric-power companies. It called attention to the dangerous degree
to which pyramiding had been practiced in superposing a series of holding companies
over the underlying operating companies, and was influential in bringing about the
more comprehensive inquiry described under Power--Utility Corps., below. Supply
of Electrical Equipment and Competitive Conditions (S. Doc. 46, 70th, 282 p.,
1/12/28) showed, among other things, the dominating position of General Electric Co.
in the equipment field.
Power--Interstate Transmission (Senate).--Investigation (S. Res. 151, 71st,
11/8/29) was made of the quantity of electric energy transmitted across State lines and
used for development of power or light, or both (Interstate Movement of Electric
Energy, S. Doc. 238, 71st, 134 p., 12/20/30).
Power--Utility Corporations (Electric and Gas Utilities) (Senate).--This extensive inquiry (S. Res. 83, 70th, 2/15/28; Public Res. 46, 73d, 6/1/34; and F. T. C.
Act, Sec. 6) embraced the financial set-up of electric and gas utility companies
operating in interstate commerce and of their holding companies and other companies
controlled by the holding companies. The inquiry also dealt with the utilities’ efforts
to influence public opinion with respect to municipal ownership of electric utilities.

The Commission’s reports and recommendations, focusing Congressional attention
upon certain unfair financial practices in connection with the organization of holding
companies and the sale of securities, were among the influences which brought about
enactment of such remedial legislation as the Securities Act of 1933, the Public Utility
Holding Company Act of 1935, the Federal Power Act (1935), and the Natural Gas
Act (1938).
Public hearings were held on all phases of the inquiry and monthly interim reports
presented hundreds of detailed studies by the commission’s economists, attorneys,
accountants and other experts, based on examination of 29 holding companies having
$6,108,128,713 total assets; 70 subholding companies with $5,685,463,201 total
assets; and 278 operating companies with $7,245,13 See footnote 8, p. 99. Conditions in one of the midcontinent fields were discussed
by the Bureau of Corporations in Conditions in the Healdton Oil Field (Oklahoma)
(116 p., 3/15/15).

INVESTIGATIONS BY THE COMMISSION, 1915-42

127

106,464 total assets. The testimony, exhibits and final reports (Utility Corporations,
S. Doc. 92, 70th) included 95 volumes. 14
Price Bases (F. T. C.).--More than 3,500 manufacturers representing practically
every industrial segment furnished data for this study (F. T. C. motion, 7/27/27) of
methods used for computing delivered prices on industrial products and of the actual
and potential influence of such methods on competitive markets and price levels. In
the cement industry the basing-point method 15 was found to have a tendency to
establish unhealthy uniformity of delivered prices and cross-haul or cross-freighting
to be an economic evil (Report of the F. T. C. on Price Bases Inquiry, Basing-Point
Formula and Cement Prices, 218 p., 3/26/32). Illustrating the use in a heavy
commodity industry of both a modified zone-price system and a uniform deliveredprice system, the Commission examined price schedules of the more important
manufacturers of range boilers, 1932-36, disclosing that the industry operated under
a zone-price formula, both before and after adoption of its N. R. A. code (Study of
Zone-Price Formula in Range Boiler Industry, 5 p., processed, 3/30/36, a summary
based on the complete report which was submitted to Congress but not printed).
Price Deflation (President).--To an inquiry (3/21/21) of President Harding, the
Commission made prompt reply (undated) presenting its views of the causes of a
disproportional decline of agricultural prices compared with consumers’ prices (Letter
of the F. T. C. to the President of the U. S., 8 p., o. p.).
Priorities (W. P. B.), Wartime, 1941-42.--Compliance by certain basic industries
with WPB orders relative to allocation of supply and priority of delivery of war
materials, is being investigated by the Commission (Executive orders, Jan. 1942).
Recent inquiries, national in scope, embraced 1,110 companies in the steel, copper
fabricating, copper ingots, jewel bearings, silverware, and chromium and nickel
industries, and 947 aluminum foundries. (See p. 11.)
Production Cost Accounting (F. T. C.), Wartime, 1941-42.--This investigation
covered production cost accounting methods and systems used in the bread baking,
paperboard, steel and other industries during wartime.
Profiteering (Senate), Wartime, 1917-18.--Current conditions of profiteering (S.
Res. 255, 65th, 6/10/18) as disclosed by various Commission investigations were
reported in Profiteering (S. Doc. 248, 65th, 20 p., 6/29/18).
Radio (House).--A comprehensive investigation of the radio industry (H. Res. 548,
67th, 3/4/23; Report of the F. T. C. on the Radio Industry, 347 p., 12/1/23) contributed
materially to enactment of the Radio Act of 1927 and the succeeding Federal
Communications Act of 1934. The investigation was followed by Corn-mission and
Department of Justice proceedings on monopoly charges which culminated in a
consent decree (11/2/32; amended 11/2/35).
Rags, Woolen.--See Textiles.
Raisin Combination.--See Food.
Range Boilers.--See Price Bases.
Resale Price Maintenance (F. T. C.).--The question whether a manufacturer of
standard articles, identified by trade-mark or trade practice, should be permitted to fix
by contract the price at which purchasers should resell. them led to the first inquiry,
resulting in a report, Resale Price Maintenance (H. Doc. 1480, 65th, 3 p., o. p.,
12/2/18). Other reports were: A Report on Resale Price Maintenance (H. Doc. 145,
66th, 3 p 6/30/19, and Resale Price Maintenance (F. T. C. motion 7/25/27; reports,
Part I, H. Doc. 546, 70th, 141 p., o. p., 1/30/29, and Part II, 215 p., 6/22/31).

Salaries (Senate).--The Commission investigated (S. Res. 75, 73d, 5/29/33) salaries
of executives and directors of corporations (other than public utilities) engaged in
interstate commerce, such corporations having more than $1,000,000 capital and assets
and having their securities listed on the New York stock or curb exchanges. The
Report of the F. T. C. on Compensation of Officers and Directors of Certain
Corporations (15 p., processed, 2/26/34) explained the results of the inquiry. 16 The
facts developed focused the attention of Congress on the necessity of requiring listed
corporations to report their salaries.
14 Final reports were published in 1935; a general index in 1937. Some of the volumes are out of print.
For report titles, see F. T. C. Annual Report, 1941, p.221; and for lists of companies investigated, see F.
T. C. Annual Reports, 1935, p. 21, and 1936, p.36.
15 Basing-point systems are also discussed in the published reports listed under “Cement,” “Steel
Code.” and “Steel Sheet Piling” herein.
16 The salary lists do not appear in the report but are available for inspection,

128

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Sisal Hemp (Senate).--The Commission assisted the Senate Committee on
Agriculture and Forestry in an inquiry (S. Res. 170, 64th, 4/17/16) and advised how
certain quantities of hemp, promised by the Mexican sisal trust, might be fairly
distributed among American distributors of binder twine (Mexican Sisal Hemp, S. Doc.
440, 64th, 8 p., o. p., 5/9/16). The Commission’s distribution plan was adopted.
Southern Livestock Prices.--See Food.
Steel Code and Steel Code as Amended (Senate and President).--The Commission investigated (S. Res. 166, 73d, 2/2/34) price fixing, price increases, and other
matters (Practices of the Steel Industry Under the Code, S. Doc. 159, 73d, 79 p.,
3/19/34) and the Commission and N. R. A. studied the effect of the multiple basingpoint system under the amended code (Report of the F. T. C. to the President in
Response to Executive Order of May 30, 1934, With Respect to the Basing-Point
System in the Steel Industry, 125 p., 11/30/34). 17 The Commission recommended
important code revisions.
Steel Companies, Proposed Merger (Senate).--An inquiry (S. Res. 286, 67th,
5/12/22) into a proposed merger of Bethlehem Steel Corp.- and Lackawanna Steel Co.,
and of Midvale Steel & Ordnance Co., Re public Iron & Steel Co., and Inland Steel
Co., resulted in a two-volume report, Merger of Steel and Iron Companies (S. Doc.
208, 67th, 11 p., o. p., 6/5/22 and 9/7/22).
Steel Costs and Profits.--See Wartime Cost Finding, 1917-18.
Steel Costs and Profits (O. P. A.), Wartime, 1941-42.--Costs, prices, and profits
covering 30 major steel producing companies comprise this study now in progress.
The inquiry embraces costs for about 90 percent of the country’s total steel production.
(See p. 17.)
Steel Sheet Piling--Collusive Bidding (President).--Steel sheet piling prices on
certain Government contracts in New York, North Carolina, and Florida were
investigated (inquiry referred to F. T. C. 11/20/35). The F. T. C. Report to the
President on Steel Sheet Piling (42 p., processed, 6/10/36) demonstrated the existence
of collusive bidding because of a continued adherence to the basing-point system 18
and provisions of the steel industry’s code.
Stock Dividends (Senate).--The Senate requested (S. Res. 304, 69th, 12/22/26) the
names and capitalizations of corporations which bad issued stock dividends, and the
amounts thereof, since the Supreme Court decision (3/8/20) bolding that such
dividends were not taxable. The same information for an equal period prior to the
decision was also requested. The Commission submitted a list of 10,245 corporations,
pointing out that declaration of stock dividends at the rate prevailing did not appear
to be a result of controlling necessity and seemed questionable as a business policy
(Stock Dividends, S. Doc. 26, 70th, 273 p., 12/5/27).
Sugar.--See Food.
Taxation and Tax-Exempt Income.--See National Wealth and Income.
Temporary National Economic Committee, Studies of the F. T. C.--See F. T. C.
Annual Report, 1941, p.218, for titles.
Textiles (President) --President Roosevelt (Executive order of 9/26/34) directed an
inquiry into the textile industry’s labor costs, profits, and investment structure to
determine whether increased wages and reduced working hours could be sustained
under prevailing economic conditions. Reports covering the cotton, woolen and
worsted, silk and rayon, and thread, cordage and twine industries, were: Report of the
F. T. C. on Textile Industries, Parts I to VI, 12/31/34 to 6/20/35, 174 p. (Part VI,

financial tabulations, processed, 42 p., o. p.); Report of the F. T. C. on the Textile
Industries in 1933 and 1934, Parts I to IV, 8/1/35 to 12/5/35,129 p.; Parts II and III, o.
p. (Part IV, processed, 21 p.; accompanying tables, processed, 72 p., o. p.); Cotton
Spinning Companies Grouped by Types of Yarn Manufactured During 1933 and 1934,
1/31/36, 20 p., processed, o.p.; Cotton Weaving Companies Grouped by Types of
Woven Goods Manufactured During 1933 and 1934, 3/24/36, 48 p., processed, o. p.;
Textile Industries in the First Half of 1935, Parts I to III, 5/22/36 to 8/22/36, 119 p.,
processed; Textile Industries in the Last Half of 1935, Parts I to III, 11/20/36 to
1/6/37,155 p., processed; and Textile Industries in the First Half of 1936, Parts I to III,
1/21/37 to 2/11/37, 163 p., processed.
17 As of the same date the N. R. A. published its Report of the National Recovery
Administration on the Operation of the Basing-Point System in the Iron and Steel
Industry (175 p., processed). The basing-point system is also discussed in published
reports listed under “Cement” and “Price Bases” herein.
18 See footnote 17, p. 98.

INVESTIGATIONS BY THE COMMISSION, 1915-42

129

Textiles--Combed Cotton Yarns.--High prices of combed cotton yarns led to this
inquiry (H. Res. 451, 66th, 4/5/20) which disclosed that while for several years profits
and prices had advanced, they declined sharply late in 1920 (Report of the F. T. C. on
Combed Cotton Yarns, 94 p., o. p., 4/14/21).
Textiles--Cotton Growing Corporation.--See Foreign Trade.
Textiles--Cotton Merchandising (Senate)--Investigating abuses in handling
consigned cotton (S. Res. 252, 68th, 6/7/24), the Commission made recommendations
designed to correct or alleviate existing conditions (Cotton Merchandising Practices,
S. Doc. 194, 68th, 38 p., 1/20/25).
Textiles--Cotton Trade (Senate).--Investigation (S. Res. 262, 67th, 3/29/22)
involved a decline in cotton prices, 1920-22, as reported in Preliminary Report of the
F. T. C. on the Cotton Trade (S. Doc. 311, 67th, 28 p., o. p., 2/26/23). After a second
inquiry (S. Res. 429, 67th, 1/31/23), the Commission recommended certain reforms
in trading practices and particularly in permitting Southern delivery of cotton on New
York futures contracts (The Cotton Trade, incl. testimony, S. Doc. 100, 68th, 2 vols.,
510 p., o. p., 4/28/24) A subsequent Senate bill (S. 4411, 70th, 5/18/28) provided for
Southern warehouse delivery, but, before any law was enacted, the New York Cotton
Exchange adopted Southern delivery on New York futures contracts (11/16/28 and
2/26/30) in accordance with the Commission’s recommendations.
Textile--Woolen Rag Trade (F. T. C.), Wartime, 1917-18.--The Report on the
Woolen Rag Trade (90 p., o. p., 6/30/19) contains information gathered during the
World War, 1917-18, at the request of the War Industries Board, for its use in
regulating the prices of woolen rags employed in the manufacture of clothing.
Tobacco (Senate).--Inquiry (S. Res. 329, 68th, 2/9/25) into activities of two wellknown companies disclosed that alleged illegal agreements or conspiracies did not
appear to exist (The American Tobacco Co. and the Imperial. Tobacco Co., S. Doc.
34, 69th, 129 p., o. p., 12/23/25).
Tobacco Marketing--Leaf (F. T. C.).--Although representative tobacco farmers in
1929 alleged existence of territorial and price agreements among larger manufacturers
to control cured leaf tobacco prices, the Commission found no evidence of price
agreements and recommended production. curtailment and improvement of marketing
processes and cooperative relations (Report on Marketing of Leaf Tobacco in the FlueCured Districts of the States of North Carolina and Georgia. 54 p., processed,
5/23/31).
Tobacco Prices (Congress).--Inquiries with respect to a decline of loose-leaf
tobacco prices following the 1919 harvest (H. Res. 533, 66th, 6/3/20) and low tobacco
prices as compared with high prices of manufactured tobacco products (S. Res. 129,
67th, 8/9/21) resulted in the Commission recommending modification of the 1911
decree (dissolving the old tobacco trust) to prohibit permanently the use of common
purchasing agencies by certain companies and to bar their purchasing tobacco under
any but their own names (Report of the F. T. C. on the Tobacco Industry, 162 p., o. p.,
12/11/20, and Prices of Tobacco Products, S. Doc. 121, 67th, 109 p., o. p., 1/17/22).
Trade and Tariffs in South America (President).--Growing out of the First PanAmerican Financial Conference held in Washington, May 29, 1915, this inquiry
(referred to F. T. C. 7/22/15) was for the purpose of furnishing necessary information
to the American branch of the International high Commission appointed as a result of
the conference. Customs administration and tariff policy were among subjects
discussed in the Report on Trade and Tariffs in Brazil, Uruguay-Argentina, Chile,

Bolivia, and Peru (246 p., o. p., 6/30/16).
Twine.--See Sisal Hemp and Textiles.
Utilities.-See Power.
War Material Contracts (House), Wartime, 1941-42.--At the request of the House
Committee on Naval Affairs, the Commission assigned economic and legal examiners
to assist in the Committee’s inquiry into progress of the national defense program (H.
Res. 162, 77th, 4/2/41). The Commission’s examiners were active in field
investigations covering aircraft manufacturers’ cost records and operation, naval air
station construction, materials purchased for use on Government contracts, and
industry expansion financing programs.
Wartime Cost Finding (President) 1917-18.--President Wilson directed the
Commission (7/25/17) to find the costs of production of numerous raw materials and
manufactured products. The inquiry resulted in approximately 370 wartime cost
investigations. At later dates reports on a few of them were published,19 including:
Cost Reports of the F. T. C--Copper (26 p., o. p., 6/30/19);
19

See footnote 10, p.122

130

ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION

Report of the F. T. C. on Wartime Costs and Profits of Southern Pine Lumber
Companies (94 p., o. p., 5/1/22); and Report of the F. T. C. on Wartime Profits and
Costs of the Steel Industry (138 p., 2/18/25). The unpublished reports 20 cover a wide
variety of subjects. On the basis of the costs as found, prices were fixed, or controlled
in various degrees, by Government agencies such as the War and Navy Departments,
War Industries Board, Price Fixing Committee, Fuel Administration, Food
Administration, and Department of Agriculture. The Commission also conducted cost
inquiries for the Interior Department, Tariff Commission, Post Office Department,
Railroad Administration, and other Government departments or agencies. It is
estimated that the inquiries helped to save the Country many billions of dollars by
checking unjustifiable price advances.
Wartime Inquiries, 1917-18, Continued.--Further wartime inquiries of this period
are described herein under the headings: Coal, Coal Reports-Cost of Production, Cost
of Living, Flags, Food, Farm Implements, Independent Harvester Co., Leather and
Shoes, Paper--Book, Paper--Newsprint, Profiteering, and Textiles--Woolen Rag Trade,
Wartime Inquiries, 1941-45.--To aid in the 1941-45 war program, F. T. C. was
called upon by other Government departments, particularly the war agencies, to use
its investigative legal, accounting, statistical and other services in conducting
investigations. It made cost, price and profit studies; compiled industrial corporation
financial data; investigated compliance by basic industries with W, P. B. priority
orders; and studied methods and costs of distributing important commodities. The
1941-45 wartime investigations are herein listed under the, headings: Advertising as
a Factor in Distribution; Cigarette Shortage; Distribution Methods and Costs; Fertilizer
and Related Products; Food--Biscuits and Crackers; Food--Bread Baking; Food--Fish;
Food--Flour Milling; Household Furniture; Industrial Corporation Reports; MetalWorking Machines; Paperboard; Priorities; Production Cost Accounting; Steel Costs
and Profits; and War Material Contracts.
20 Approximately 260 of the wartime cost inquiries are listed in the F. T. C. Annual
Reports, 1918, pp.29-30, and 1919, pp. 38-42, and in World War Activities of the F.
T. C., 1917-18 (69 p., processed, 7/15/40).

INDEX
[Index does not include names or items In alphabetical lists, tables, or appendixes for names of
export trade associations, see page 87; for summaries relating to trust laws and competitive
conditions in foreign countries or dominions, see page 89; for appropriation items, see page 96;
and for titles and summaries of general investigations, 1915-42, see page 117]
Page
Acme Steel Co., Chicago
46
Advertising, false and misleading:
Almanac
80
Complaints alleging
34
Food, drugs, devices, cosmetics
28, 32, 79, 85
Injunctive proceedings
28
Mail-order catalog
81
Newspaper and magazine
80
Orders involving
44
Radio broadcast
81
Radio and periodical
6, 28, 33, 79
Stipulations involving
33, 79, 82
Advertising, survey of war-related
4, 22
Agricultural Marketing Administration
85
Aloe Co., A. S., St. Louis
46
Aluminum foundries investigation
12
American Bridge Co
63
American Medicinal Products, Inc., Los Angeles
61
American Steel and Wire Company of New Jersey, Cleveland
57, 63
Anchor Hocking Glass Corporation, Lancaster, Ohio
56
Aronberg, Earl, trading as Positive Products Co., Chicago
61
Aspironal Co., Atlanta, Ga
42
Associated News Photographic Service, Inc., New York
61
Attorney General of the United States
61
Ayres, William A., Chairman, Federal Trade Commission
5
Beauty and barber equipment and supplies industry
3, 68
Bell Yarn Co., New York
43
Benton Announcements, Inc., Buffalo
61
Berland Supply Co., Inc., Milwaukee
40
Board of Economic Warfare
24
Boulevard Candy Co., Chicago
62
Bread and flour Investigations
16
Bureau of Animal Industry
85
Bureau of the Budget
13, 18
Bureau of the Census
15
Candymasters, Inc., Minneapolis
58
Carnegie-Illinois Steel Corporation
63
Carter, Hiram, Inc., Elmhurst, Long Island, N.Y.
62
Casey Concession Co., Chicago
62
Charles of the Ritz Distributors Corporation, New York
61
Chicago Medical Book Co., Chicago
40
Clarke, Frederic A., Glendale, Calif
56
492824--42

131

132

INDEX

Page
Clayton Act (see Robinson-Pitman Act)
1, 26, 27, 31, 35, 45
Civil penalties under
27
Complaints issued under
35
Orders issued under
45
Section 2
1, 31, 35, 45, 56
Section 3
1, 36, 46, 56, 57, 60, 63
Section 7
1, 9, 31
Section 8
1
Clinton Co., Clinton, Iowa
45
Colorfastness of textiles, proposed trade practice rules for
23
Complaints, formal
2, 26, 33
Congress
2, 8, 9
Corn Products Refining Co., New York
45, 47
Costs, prices and profits investigations
4, 15
City, Inc., Wilmington, Del
59
Council of National Defense, Advisory Commission to
24
Court cases
2, 55
D. D. D. Corporation, Batavia, Ill
56
Davis, Ewin L., Commissioner
5
DeForest’s Training, Inc., Chicago
62
DeLuxe Products Co., Chicago
62
Department of Agriculture
7
Department of Justice
8
Detroit Candy & Tobacco Jobbers Association, Inc., Detroit
41
Disabled American Veterans of the World War Rehabilitation Department; Chicago
43
Distribution methods and costs investigation
4, 19
Douglas Candy Co., St. Joseph, Mo
58
Etablissements Rigaud, Inc., New York
59
Evans Novelty Co., Chicago
57
Executive Office of the President, Division of Statistical Standards
13
Export Trade Act (Webb-Pomerene Act)
1, 3, 26, 87
Export Trade Associations
3, 87
Federal Trade Commission:
Acts administered by
1
Administrative divisions
5, 7
Appropriations, expenditures, and fiscal affairs
95
Branch offices
6
Chairman
5, 16, 23, 24
Chief Counsel
6, 26
Chief Examiner
6, 25, 26
Chief Trial Examiner
6, 26
Commissioners
5
Decisions (printed volumes)
8
Director of Trade Practice Conferences
6
Director, Radio and Periodical Division
6, 26, 79
Division of Accounts, Statistics and Economic Investigations
5, 7
Economic adviser to
7
Export Trade Section
6
Foreign trade work
87
Functions
1
General investigations
1, 3, 117

INDEX
Federal Trade Commission--Continued.
Legal activities
Legal Investigation Division
Medical Advisory Division
Organized
Personnel
Publications
Radio and Periodical Division
Recommendations
Rules of practice
Secretary
Statement of policy
Trade Practice Conference Division
Trial and Appellate Division
Trial Examiners Division
War committees, membership on
Wartime investigations
Federal Trade Commission Act
Amended
Approved
Civil penalties under
Complaints issued under
Orders issued under
Section 5
Section 6
Section 9
Section 16
Types of practices in violation of
Wheeler-Lea Amendment to
Federal Yeast Corporation, Baltimore
Ferguson, Garland S., Commissioner
Fertilizer industry Investigation
Fong Poy, trading as Fong Wan, Oakland, Calif
Food and Drug Administration
Food Service Equipment Industry, Inc., Chicago
Ford Motor Co., Dearborn, Mich
Foreign trade and industry, regulations governing
Foreign trade work
Freer, Robert E., Commissioner
Fresh Grown Preserve Corporation, Lyndhurst, N. J
Fulton Co., John J., San Francisco
Gelb, Joan Clair, California
General Merchandise Co., Milwaukee
General Motors Corporation, Detroit
Gerrard Co., Inc., Chicago
Giant Tiger Corporation, Philadelphia
Hardwood Institute, Oshkosh, Wis
Haskelite Manufacturing Corporation, Chicago
Hofeller Candy Co., Bob, Chicago
Hollywood Racket Manufacturing Co., Inc., Hollywood, Calif
Roubigant, Inc., New York
Household furniture investigation

133
Page
1, 2, 25
5, 6
5, 7, 24, 32, 83, 85
1
5
7
5, 6, 26, 79
9
26, 68, 107
5
116
5, 6, 68
5
5, 6
23
1, 3, 11
1, 4, 7, 11, 26, 27, 29, 99
1, 32
1
61
33
37
55, 56
2, 8, 20, 87, 89
95
61
48
32, 56, 60
46
5
17
56
7, 85
41
44, 56
89
87
5
56
62
62
57
47, 62
46, 57
46
37
57
58
42
62
15

House Naval Affairs Committee

4, 17

134

INDEX

Page
Hudson Fur Dyeing Co., Newark, N.J.
57
Independent Offices Appropriation Acts
2, 95
Industrial corporation reports investigation
4, 12
International Parts Corporation, Chicago
62
Inter-state Cigarette Merchandisers Association, Newark, N. J
41
Investigations, general (see also wartime investigations)
1, 2, 3, 117
Jackson Sales Co., Birmingham, Ala
58
Jergens-Woodbury Sales Corporation, Cincinnati
42, 62
Kastor & Bros., Adolph, Inc., New York
61
Koch Laboratories, Inc., Detroit
63
Krasne, A., Inc., New York
46
Labeling, Informative
70, 75
Lane, Albert, Berkeley, Calif
62
Lee Boyer's Candy, Portland, Oreg
58
Life Savers Corporation, Port Chester, N.Y.
45
Lippincott Co., J. B., Philadelphia
62
Lottery cases
35, 44, 57, 62
Luggage and related products Industry
3, 68
MacDonald, James, Ltd., Stornoway, Scotland
39
McAfee Candy Co., Macon, Ga
58
Macher Watch & Jewelry Co., New York
58
March, Charles H., Commissioner
5
Mass food distributors investigation
4, 20
Met al-working machines industry investigation
4, 12
Miles Brokerage Co., Inc.. Clearfield, Pa
46
Milwaukee Jewish Kosher Delicatessen Association, Milwaukee
40
Moretrench Corporation, Rockaway, N. J
58
Moth-protecting devices, trade practice proceeding concerning
23
Muller & Co., E. B., Port Huron, Mich
62
National Bureau of Standards
7, 85
National Grain Yeast Corporation, Belleville, N. J
46
National Premium Co., Chicago
57
Navy Department
13
Newton Paper Co., Holyoke, Mass
39
New York Premium Novelty Co., New York
58
Nitke, Samuel, New York
58
Normandie et Cie, Boston
59
Office of Censorship
22
Office of Economic Stabilization
16
Office of Price Administration
1, 3, 4, 11, 13, 15, 16, 17, 19, 20, 22, 23
Office of Production Management
11, 24, 29
Orders to cease and desist
2, 27, 37
Organization Service Corporation, New York
38
Pacific Fruit & Produce Co., Walla Walla, Wash
38
Page Mill Co., The Thomas, Inc., Topeka, Kans
46
Paperboard industry Investigation
16
Park, Philip R., Inc., Los Angeles
62
Parke, Austin & Lipscomb, Inc., New York
62
Perfect Voice Institute, Chicago
62
Petroleum Coordinator for National Defense
24
Pond's Extract Co., New York
62
Post Institute Sales Corporation, New York
62

INDEX

135

Page
Post Office Department
82
Power and Gang Mower Manufacturers’ Association, Detroit
38
President of the United States
2, 4, 24
Price fixing cases
29, 33, 37
Priorities investigations
4, 11
Production cost accounting methods Investigation
4, 18
Rabhor Co., The, Inc., New York
59
Raladam Co., Detroit
55, 59
Rayon and silk dyeing, printing, and finishing industry
3, 68
Reed-Harlin Grocer Co., West Plains, Mo
46
Republic Yeast Corporation, Newark, N. J
46
Restraint of trade cases
29, 34, 40
Retail Coal Merchants Association, Richmond, Va
41
Ribbon Industry
3, 69
Robinson-Patman Act (see Clayton Act, Section 2)
1, 7, 21, 26, 31, 35, 45
Salt Producers Association, Detroit
38, 63
Sanford Mills, Sanford, Maine
43
Sauer Co., C. F., Richmond, Va
45
Scientific Apparatus Makers of America, Chicago
37, 63
Scientific Manufacturing Co., Scranton, Pa
60
Signode Steel Strapping Co., Chicago
46, 63
Staley Manufacturing Co., A. E., Decatur, Ill
45
Standard Distributing Co., Chicago
58
Stanley Laboratories, Inc., Portland, Oreg
63
Stanton, Clara, Druggist to Women, Denver
63
Steel producing companies Investigation
17
Stephen Rug Mills, New York
63
Stevenson Corporation, The, New York
60
Stipulations
2, 26, 33, 79, 82
Sun glass industry
3, 69
Supreme Court of the United States
2, 8, 28, 55, 56, 59
Temporary National Economic Committee
9
Tennessee Coal, Iron & Railroad Co
63
Trade practice conference procedure
23, 67, 68
Trade practice rules
3, 9, 23, 67, 68, 69
Trade practice work in wartime
22
“Truth in fabrics”
70, 75
Tubular Rivet & Stud Co., Wollaston, Mass
60
Uco Food Corporation, Newark, N. J
46
United Buyers Corporation, Chicago
46
United States against American Beauty Products, Chicago
61
United States against Gynex Corporation, New York
61
United States against Levore Co., Chicago
61
United States against Midwest Studios, Inc., Portland, Oreg
61
United States against Oppenheim, Collins & Co., New York
61
United States Circuit Courts of Appeals
2, 27, 28, 55
First Circuit, Boston
59
Second Circuit, New York
56, 58, 59, 60, 61, 62, 63
Third Circuit, Philadelphia
57, 59, 60, 63
Fourth Circuit, Richmond, Va
63
Fifth Circuit, New Orleans
58, 63
Sixth Circuit, Cincinnati
56, 59, 62

136

INDEX

United States Circuit Courts of Appeals--Continued.
Page
Seventh Circuit, Chicago
56, 57, 60, 61, 62, 63
Eighth Circuit, St. Louis
58
Ninth Circuit, San Francisco
56, 58, 61, 62, 63
Tenth Circuit, Denver
63
District of Columbia
58, 60, 62, 63
United States District Courts
3, 28, 55
California, Southern District of
56
District of Columbia
60
Illinois, Northern District of
61
Michigan, Eastern District of
63
New York, Southern District of
61
Oregon
61
United States Public Health Service
7
United States Senate
4
United States Steel Corporation
63
Vanderbilt Co., R. T., Inc., New York
47
Vice President of the United States
24
Von Schrader Manufacturing Co., Racine, Wis
60
War Department
13
War material contracts, costs and production investigation
17
Warner Furniture Corporation, Joseph, New York
43
Warner's Renowned Remedies Co., Minneapolis
63
War Production Board
1, 3 11, 13, 22, 24, 29
Wartime investigations
1, 3, 11
Aluminum foundries
12
Costs, prices and profits
4, 15
Bread-baking industry
16
Fertilizer industry
17
Household furniture
15
Paperboard industry
16
Steel producing companies
17
Distribution methods and costs
4, 19
Industrial corporation reports
4, 12
Metal-working machines industry
4, 12
Priority orders, compliance with
4, 11
Production cost accounting methods
4, 18
War material contracts, costs and production
17
Webb-Pomerene Act (see Export Trade Act)
Wellworth Sales Co., New York
58
Western Confectioners Association, Inc., San Francisco
38
Wheeler-Lea Amendment (see under Federal Trade Commission Act)
Wholesale, Dry Goods Institute, Inc., New York
40, 63
Williams & Co., R. C., Inc., New York
46
Winarick, AR., Inc., New York
38
Wool Products Labeling Act
2, 3, 6, 23, 26, 27, 68, 70, 75
Civil penalties under
27
Effective date
2, 75
Enforcement of
76
Purposes of
2, 75
Rules and regulations under
3, 76
Wartime measure, effective as
23


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102