the competing lines, the "premiums" on crude oil in their territory were taken off.1

Section 5. One-commodity price cutting.

A company that sells several articles or several brands can cut the price of one article or brand and still make a large profit on its business as a whole, while destroying the profits of competitors whose line is less varied. A brand on which the price is cut in this manner is often called a "fighting brand." In a report on the tobacco industry a former Commissioner of Corporations complained of certain competitive practices, which may be concisely summarized as follows: The American Tobacco Co. dominated the cigarette business in the early nineties, but its plug business was comparatively small. It set about securing a dominating position in this line also. As a weapon in this campaign it used one brand of plug tobacco, Battle Ax, the retail price of which was cut from 50 to 30 cents a pound, and the wholesale price of which, less internal-revenue tax, was put at one time as low as 7 cents. In territories where certain well-known rival brands, such as Lorillard's Climax and Liggett & Myer's Star, were favorites, men were sent through the country distributing samples; they presented a plug of Battle Ax to every man they saw. During the four years 1895, 1896, 1897, and 1898, the company made a net loss on its plug business of $3,300,000. But it effected its purpose by obtaining during these years and the years immediately following a substantially monopolistic control of the plug-tobacco market.2

In the suit of the United States against the American Tobacco Co., the court was asked by the independent tobacco manufacturers to restrain the new corporations after the dissolution—

From giving away, selling at or below the cost of manufacture and distribution, any of its products, or adopting any other method of cutthroat competition for the purpose of destroying or of acquiring the business or trade of a competitor.

Louis D. Brandeis refers to this and other restraints asked for by the independents as "restraint upon unfair competition." 3

a

Dealers in a commodity sometimes complain of its use as "leader" by other dealers, of whose trade it is a comparatively unimportant part. Thus, the president of the American Surgical Trade Association said in 1914: "One member has complained very bitterly of pharmaceutical houses making a practice of selling sur

1 Report of the Industrial Commission, vol. 1, p. 394, 395.

2 Report of the Commissioner of Corporations on the Tobacco Industry, Pt. I, pp. 96, 365-375.

* Control of Corporations, Persons, and Firms Engaged in Interstate Commerce: Report of the Committee on Interstate Commerce, United States Senate, 62d Cong., Pursuant to S. Res. 98, with Hearings, Digest, and Index; pp. 1221, 1222.

gical instruments at, and below, cost, as a leader, in the hope of being able to sell the doctor a line of their own preparations."1

Section 6. Price reduction in general.

Any reduction of price is often felt to be unfair by manufacturers and dealers who are interested in maintaining a higher price. Thus, the president of the American Surgical Trade Association said in his annual report for 1914:

There has come directly under my observation but one extremely flagrant case of price cutting on surgical instruments. In this case a physician in one of the larger of our north Texas towns sent out a list on which he invited bids. Several houses quoted regular list prices less 10 per cent for cash, while one of the eastern houses quoted as high a discount as 10 per cent and 5 per cent for cash, but even this did not get the order, a Cincinnati institution having quoted a flat dollars-and-cents price which drew the order. The house which quoted the 10 per cent and 5 per cent for cash offered as an apology that this doctor had written them on numerous occasions for prices, but that they were never able to draw an order on the regular 10 per cent cash discount, and consequently they, in this particular instance, simply took a chance by quoting an extra 5 per cent. This is a theory of eastern competition which southern and western houses find very hard, and, we think, very unfair.❜

Section 7. Use of trading stamps, coupons, and the like.

The American Tobacco Co. has made effective use of the coupon or premium system-giving with each package of certain goods a coupon, tag, or other mark, redeemable in "premiums." The system is said to lend itself readily to local price discrimination, and to be especially effective in making sales because it enlists the interest of the whole family in the kind and quantity of tobacco consumed by the user. For years the business of the tobacco combination along this line was so great that it maintained a separate corporation to redeem its coupons. It is alleged that a small company can not effectively compete with a large one in applying the premium system, and that this system tends toward monopoly, under present industrial conditions. It has therefore come to be widely condemned as unfair. Says one writer, addressing the members of the National Association of Retail Druggists, "Do you want to stop the tobacco-drug trust from strangling you with a so-called coupon system that is nothing less than a trust-issued currency?" 3

The dislike of the system among merchants is not confined, however, to the smaller sort. Marshall Field & Co. were reported to have announced on April 9, 1915, that all merchandise involving the distribution of profit-sharing coupons would be dropped from their

1 President's report, American Surgical Trade Association, June 15, 1914: Proceedings of the Fourteenth Annual Meeting of the American Surgical Trade Association, pp. 8, 9. 2 Proceedings of the Fourteenth Annual Meeting of the American Surgical Trade Association, p. 9.

3 Interstate Trade: Hearings before the Committee on Interstate Commerce, United States Senate, 63d Cong., 2d sess., on Bills Relating to Trust Legislation, p. 1419.

wholesale and retail business; and in this connection, according to the Journal of Commerce, "a member of the firm of R. H. Macy & Co. authorized a statement as follows: 'We are opposed to all profitsharing coupon schemes or any other promise to give something for nothing.'"

1

Section 8. Excessive credits.

A bill submitted to the Senate Committee on Interstate Commerce in 1914 provided:

* * * the sale or offer for sale of commodities upon * * terms which extend or promise to extend the date of final payment beyond one year from the date of actual shipment of the commodities sold or offered for sale, shall be prima facie proof of the purpose or intention to injure or destroy competitors.

The report of a former Commissioner of Corporations on the International Harvester Co. criticized the long credits given by that company on certain kinds of farm machinery, and said:

There is a very general complaint from competing manufacturers, especially the smaller concerns, that the International Harvester Co. uses these long credits as a means of wresting trade from its rivals. * There is no doubt that the smaller competitors of the International Harvester Co. find this situation very difficult to meet, because their financial resources are generally inadequate to do business in that way. The International Harvester Co. is enabled to pursue this policy of granting long terms because of the large resources which it acquired through combination."

Section 9. Reductions of price for quantity.

It is usually admitted that large buyers should have lower prices than small buyers, but persons who admit this sometimes complain that the actual differences are unfairly large. Thus the secretary of the National Federation of Retail Merchants says:

** *

I recognize the fact, as do all small business men, that the man who buys in large quantities is entitled and should be entitled to buy at a less price, but that difference in price, especially when both transactions are cash, should not amount to as much as would be a gross reasonable profit. To avoid having the mail-order house establish a competitive factory, the manufacturer often makes the mail-order house a price low enough to persuade him not to establish his own factory, and I haven't the slightest doubt that in thousands of cases to-day the mail-order house, by reason of this indirect intimidation of the manufacturer is buying many items of merchandise at a less price possibly than they can be manufactured. The question I particularly desire to ask you at this time is, would this section 5 cover this kind of unfair competition? It is the most serious and far-reaching unfair competition, we believe, that the small business man has to deal with.*

* *

1 The Journal of Commerce and Commercial Bulletin, New York, Apr. 10, 1915, p. 5. 2 Interstate Trade: Hearings before the Committee on Interstate Commerce, United States Senate, 63d Cong., 2d sess., on Bills Relating to Trust Legislation, pp. 1064, 1065. 3 Report of the Commissioner of Corporations on the International Harvester Co., pp. 287, 288. See also pp. 320-323 of that report.

4 Interstate Trade: Hearings before the Committee on Interstate Commerce, United States Senate, 63d Cong., 2d sess., on Bills Relating to Trust Legislation, pp. 1419, 1420.

Vincent J. Farley, publisher of a tobacco-trade publication, says: Here is an example: A manufacturer of a product nationally advertised, in great demand, allows a lower price to a jobbing firm buying $100,000 worth at a time. That jobbing firm will sell to the retail trade at a lower price than the competing and less-favored jobbers can buy wholesale. As a result you have a monopoly in the jobbing business.1

There is some support for the proposal that each kind of manufactured goods shall be sold at a uniform price per unit. One man says:

Force every manufacturer of an article entering into interstate commerce to name a price on that article at his factory door and make a good healthy penal sentence fall on anyone quoting or billing any other price."

Louis D. Brandeis believes that in a comparatively few years the law will forbid the giving of quantity discounts, "because," he says, "I think it is fraught with very great evil. The practice of giving quantity discounts menaces the small retail business." a In another place Mr. Brandeis says:

If we wish to preserve the small dealer from destruction we may be compelled to require that all retailers, large or small, be enabled to purchase the same article at the same price, applying the one-price policy throughout. Many enlightened manufacturers have already abandoned the practice of giving quantity discounts, coming to this conclusion, that if they wish to preserve the small retailer they must do so.*

Section 10. Special advantages in transportation (rebates, etc.).

In several industries the dominant producers control the only or the best available means of transportation. For anthracite coal, the control of the mines rests in the same hands as the control of the railroads over which it is hauled to market. In a suit brought by the Government its officers complained that the roads kept down the value of coal at the mines and recouped themselves by very high freight rates, and thus kept down the value of coal land till they had bought up practically all of it. Moreover, the principal anthracite railroad, the Reading, it was asserted, granted rebates to its associated coal company, the Philadelphia & Reading Coal & Iron Co., by carrying its freight charges, to the extent of millions of dollars, as a debt without interest on its books.5

1 Trust Legislation: Hearings before the Committee on the Judiciary, House of Representatives, 63d Cong., 2d sess., on Trust Legislation, p. 534.

2 Interstate Trade: Hearings before the Committee on Interstate Commerce, United States Senate, 63d Cong., 2d sess., on Bills Relating to Trust Legislation, p. 1436. See also ibid., p. 1110.

3 To Prevent Discrimination in Prices and to Provide for Publicity of Prices to Dealers and to the Public Hearings before the Committee on Interstate and Foreign Commerce, House of Representatives, 63d Cong., 2d and 3d sess., on II. R. 13305, p. 45; statement of Louis D. Brandeis, Jan. 9, 1915.

Ibid., p. 43.

5 United States v. Reading Co. et al. In the District Court of the United States, Eastern District of Pennsylvania. Brief for the United States (May, 1914), p. 55.

A similar criticism was made by a former Commissioner of Corporations with respect to the iron-ore trade:

The dominating position in the ore industry enjoyed by the Steel Corporation ** is heightened because of its very marked degree of control of the transportation of ore in the Lake Superior district. The corporation owns two of the most important ore railroads. The net earnings of these ore railroads, which are chiefly from the ore traffic, are phenomenal. This has the practical effect of reducing the Steel Corporation's net cost of ore to itself at upper lake ports, and, on the other hand, of increasing that cost to such of its competitors as are dependent upon the corporation's railroads for transportation.1

A more widespread condition is rate discrimination in favor of powerful interests on public means of transportation which they do not directly control. This is a question which State legislatures took up nearly 50 years ago, and which for 30 years has had the attention of Congress. It is frequently asserted that it was railroad discrimination that gave the Standard Oil Co. its first predominance and that gave it the wealth with which it afterwards built its private means of transportation. Discriminations so enormous as to absolutely crush out all competition have probably been eliminated by the law, but discrimination by various indirect means has not been wholly eliminated. Less than 10 years ago a former Commissioner of Corporations found and severely condemned freight arrangements which shut out competitors of the Standard Oil Co. from extensive regions. From time to time the Interstate Commerce Commission brings to light discriminations which, if smaller than those of many years ago, are far from unimportant.

Section 11. Fixing resale prices.

Fixing of resale prices by manufacturers is regarded by some as an unfair method of controlling the market. Bruce Wyman, formerly professor of law at Harvard University, wrote as follows in an article on "Unfair competition by monopolistic corporations":

But there are other policies by which many trusts have gained their dominating position, the illegality of which has not been so clear. Such an excluding policy as the refusal to sell to retailers, who persist in buying anything of a rival manufacturer, is one example. * * Fixing the prices at which the product may be resold is in the same class. The monopolies which are keeping their position by these policies have no economic justification, and for them there can be no defense. I believe that the law should punish such discriminatory practices as these so severely that no one would take the risk of employing them.❜

1 Report of the Commissioner of Corporations on the Steel Industry, Pt. I, p. 60.

2 Report of the Commissioner of Corporations on the Transportation of Petroleum, May

2, 1906; many passages, especially the summary, pp. 1–28.

3 The Annals of the American Academy of Political and Social Science, vol. 42, July, 1912, p. 69.