without compensation or due process of law. The actual and potential damages which your petitioner has suffered and will suffer by reason of the said decree and the indirect damage to your petitioner's grower members in destroying their principal markets is impossible of calculation. Destroying such channels of distribution directly and adversely affects every fruit producer in California, and in many instances elsewhere.

The said Southern and National Wholesale Growers' Associations are the concerns most actively opposed to the vacation or modification of the said decree, particularly for the reason, as hereinbefore alleged, that the direct and immediate effect of the said decree was to create and continue an absolute monopoly in the unrelated commodities in their members' favor. The said associations do not represent the public interest, but their object is to prevent competition against their members and to preserve and expand the said monopoly which the said decree created for them.

Your petitioner further avers that the wholesale grocers were and are charging the canners far too much to distribute canned goods, and California producers of dried and canned fruits know that this was and is true. One of the chief objections urged by the wholesale grocers against the reentry of the packers in distribution is that the packers would follow the practice of handling only those groceries in which there are good profits, and that if the profit on these certain lines were reduced by competition, the wholesale grocers would be put out of business. They insist that the producers of canned and dried fruits, canned vegetables, and other items, on which they make large profits, must continue to be at their mercy, and that the public must continue to pay extortionate prices for canned goods, in order that they may make these profits. Your petitioner avers that 37 cents of the consumer's dollar represents the cost of producing the article and the cost of the material that goes into it, that 14 cents thereof represents all the profits, and that the remaining 49 cents thereof represents the cost of distribution service. The producers and consumers are insistent that this cost of distribution service shall be reduced, but as the wholesalers are the hub around which the whole system of distribution is built, they are resisting to the utmost any method or means by which the people will be able to save at least a part of the 49 cents which they are compelled to pay for distribution service, out of every dollar which they are forced to spend for necessaries.

The destruction of the packers' highly efficient, expeditious, and economical system of food distribution will not tend to bring the cost of food back to normalcy, nor will the denial in the future of the

rights to use such facilities keep down the high cost of food. The decree in this cause prohibits certain corporations and individuals from engaging in businesses which are open to all others, and efficiency has been almost destroyed. A continuance of the decree is not in the best interests of the public, but is seriously injurious to the producer, the packer, and the public and serves only the selfish purposes of the wholesale grocers. There are some 300 concerns engaged in this country as meat packers and in the scientific handling of meats in interstate distribution, and they have developed the most modern and economic method of distribution ever established. It is entirely against the interest of the public and the producers to withdraw the facilities of the meat packers from public use in the unrelated commodities. The public can not be benefited by destroying the competition thus created and leaving the entire system of distribution service exclusively in the control of the wholesale grocers.

Your petitioner further avers that the most simple solution of the intolerable effect produced by the said consent decree is to vacate it in its entirety, or at least so to modify it as to restore to the producers the use of the packers' facilities for distribution.

It is conceded even by the wholesale grocers that the meat packers of the United States and by the meat packers—I do not refer to the so-called Big Five, but to all those engaged in the scientific handling in interstate distribution of meats, some 300 concerns in this country-have developed the most modern and economic method of distribution yet established. As producers we insist that it is entirely against the public interest to withdraw these facilities from public use. How has the public benefited by removing this competition, thus leaving the people in the clutches of the wholesale grocers' associations?

Producers, canners, and food manufacturers, especially those who are not large enough to support complete sales and distributing organizations, should be able to avail themselves of such facilities as the packers have, to assist them in the distribution of their products. This will enable the smaller producing units to compete with large organizations on a more equal basis.

d) The Cost of Unpreparedness11

If the charge of the appellant (the California Cooperative Canneries), is true, that the wholesale grocers are using the decree against

41Opinion of Associate Justice Van Orsdel, United States Court of Appeals of the District of Columbia, granting permission to the California Cooperative Canneries to intervene in the case of the Packers' Consent Decree (299 Federal 908; June 2, 1924).

the packers to strengthen and build up a giant monopoly in their various and varied lines of business, there would seem to be demand for a searching inquiry as to whether or not the court is being used as an agency to restrain one monopoly and thereby promote, strengthen, and build up another. Clearly it is not the policy of the Anti-trust Act to accomplish this result.

e) First Aid-Five Years After the Attack12

2. The said motion of the California Cooperative Canneries to suspend the operation of the said decree of February 27, 1920, is granted, and the operation of said decree as a whole is suspended until further order of the court to be made, if at all, after a full hearing on the merits, according to the usual course of chancery proceedings.

f) What Price Glory43

If we have destroyed that efficiency which might result in lower prices we have destroyed autocracy, and returned to the democratic kind of government in business.

208. The Problem of Price Maintenance11

BY GERARD C. HENDERSON

The business basis of the attempt to maintain set prices, both wholesale and retail, is much the same as in the case of trade discounts. A manufacturer produces an article, generally under a trademark or name, and advertises it on a lavish scale in the national market. A minimum of quality is of course a sine qua non, but apart from this, commercial success will depend, first, on creating an effective demand among consumers, and, second, upon persuading the army of wholesale and retail distributors to give satisfactory and aggressive service in moving the article to the consumer. Technically and legally the relation between manufacturer and wholesaler is that of vendor and purchaser, and the manufacturer may have no direct relation whatever with retail trade. Actually, however, his eye is on the ultimate consumer. His advertising and his sales policy are directed toward selling the article to the man who uses it, and all inter

42Order of Justice Jennings Bailey, Supreme Court of the District of Columbia, filed May 1, 1925.

43 Statement of Attorney General A. Mitchell Palmer before the Committee on Agriculture and Forestry of the United States Senate, January 7, 1920.

44 Adapted from The Federal Trade Commission, pp. 287-90. Copyright by Yale University Press, 1924.

mediate factors in the process of distribution are merely agencies which he employs for the purpose. Since the manufacturer is directing the sales campaign, he will expect to determine for himself the major questions of retail sales strategy, instead of leaving them to the haphazard decision of several thousand retail stores. He will determine the scope and character of the advertising, and the size and shape of the package, and, since price is one of the principal factors. of sales strategy, he will expect to prescribe to his retail distributors the price at which the article shall be offered to the public.

Obviously, if he expects the retailer to carry out his sales policy, instead of acting merely as a buyer and seller of personal property, the manufacturer must be prepared to compensate him on a scale that will make the business satisfactory. Since large-scale operations must be to some extent standardized, he will arrive at a fixed allowance per package or other unit, which will in his opinion make the business. sufficiently attractive to the average retailer to induce him to handle the product, and he will arrange, through wholesalers, to supply the retailer with the product at a price sufficiently below the set retail price to net him, upon resale, the amount allowed. The wholesaler also, performing as he does an essential service, must be assured a fair return, hence the manufacturer allows him a further standard discount, sufficient in amount to assure good service. The price to the consumer and the discounts to retailers and wholesalers are as much elements of the manufacturer's business policy as are the salaries he pays to his own officers and the price he pays for his materials.

To be effective, however, such a policy must be enforced, and it may be necessary to adopt means to insure that wholesalers and retailers comply with the manufacturer's instructions. The manufacturer cannot afford to advertise an article widely at a stated price, say, a dollar watch or a five-cent cigar, only to find that his retailers are selling it at a different price. Moreover, he feels himself under a certain obligation to protect the wholesaler and distributor, who is faithfully carrying out his policy, against the competing dealer, who is cutting prices. A contract is the most obvious means of securing the performance of a business understanding, and it may be advisable to have a corps of agents to report on sales methods of the various distributors, and to adopt disciplinary means in flagrant cases. In addition, precautions must be taken to prevent large quantities of the article from getting in the hands of dealers who have not agreed to adhere to the sales policy in question, and who for their private ends may see fit to engage in "predatory" price cutting. In view of the large amounts at stake, it is obvious that the technique of such a system may be brought to a high degree of perfection.

Such is the price-maintenance system from the point of view of the manufacturer. The two principal antagonists of the system are the department store and the chain store, and of course their version is a different one. These retail establishments, large in resources and often aggressive in management, quite naturally insist on having a sales policy of their own. They may be unwilling to act merely as agencies engaged in carrying out the sales policies of a manufacturer. As compared with the small retail store, the department or chain store is generally a large advertiser, and it is a part of the advertiser's art to create for his establishment a distinct personality which customers will remember. One may make a specialty of sales at 5 and 10 cents. Another may use as an advertising "feature" a custom of selling 50-cent articles for 48 cents, or one-dollar articles at 97 cents. Another may rely on special "sales," cut-price campaigns, bargain counters, and similar artifices. Such devices are of course utterly inconsistent with a policy of set prices, or indeed with any system of distribution which regards the retailer as a mere agency in the service of the manufacturer.

It is undoubtedly true to a large extent that chain stores and department stores, owing to rapid turnover and large volume of sales, can handle many products at a lower unit cost than can the smaller retailer, and hence feel entitled to compete for the retail trade by cperating on a smaller margin of profit. But the prime motive seems to be the advertising value of the cut price, and from this point of view, of course, the more thoroughly the set price is enforced elsewhere, the greater the effect of a much advertised cut of a few cents. Hence great efforts are directed toward securing, at wholesale or even at "distress" prices, supplies of nationally advertised articles which the "legitimate" dealers are expected to sell only at a set price, and sales of such articles at cut prices are heavily advertised. Correspondingly great are the efforts of the manufacturers and regular dealers to thwart their efforts.

The controversies engendered by this struggle have often been before the Federal Trade Commission and much before the courts.

209. The Legality of Price Maintenance15

The facts show that the Beech-Nut system goes far beyond the simple refusal to sell goods to persons who will not sell at stated prices, which in the Colgate case was held to be within the legal right of the producer.

45 From the opinion of the court in the case of Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441 (1922). The decision of the court won by a five-to-four decision.