fully explain the persistent advance of pricelevels on the production side of the markets.

Raw materials and manufactures are the two great classes of commodities most subject to the influence of combination on prices. The period over which this sway extended, from 1893 to 1913, approximately includes the main era of restrictions on competition.

In that period prices of these two classes not only recovered to the high level of 1891, but were carried far beyond to the apex of 1912. Not all this advance was, of course, due to the monopoly factor in trust organization or to contracting the scope and intensity of competition; but it is within all probability true that no such an upward swing in prices of raw materials and manufactures as that shown below could have occurred without corporate combinations.

Among the able but less conclusive discussions of the effects of combinations on prices is that by Prof. J. W. Jenks.* By means of data gathered through the agency of the United States Industrial Commission, Vol. I, charts of price movements are constructed. These bring out the differences at succeeding periods between raw material prices and finished product prices, thereby disclosing the contracting or expanding margin of profits, costs of production, etc., in sugar, petroleum, tin plate, whiskey, and iron

* The Trust Problem, J. W. Jenks. Doubleday, Page & Co., New York.

and steel products. On the whole, these methods do not prove the emergence of excessive net profits, nor phenomenal gains of any sort. They tend to show that the capacity of combinations to render prices proof against competitive organizations has been greatly overestimated.

4. Problems in Unfair Merchandising

Some of our most perplexing questions in trade practices and their relation to monopoly have arisen from the retail or merchandising side of business. Outside of the big corporations with colossal capital resources there are numerous businesses in which the individual, as distinguished from the corporation, is the creative force. This is the field of the ordinary American business man. In the solution of the trust problem he is not to be forgotten. Most amendments to the Sherman Act are proposed in his behalf. And any adjustment which impairs the capacity of the ordinary individual, be he merchant or manufacturer, to hold a serviceable place in the commercial system, is by that test vitally insufficient.

In the mercantile field the department stores, the mail-order houses, and the chain store systems have carried large-scale organization to the very door of the consumer. After thirty or more years the small retail trade does not seem to be the worse for the department stores' success in the cities. The chain stores are

admitted to sell only about 10 per cent below the individual retailer's prices (Pittsburgh). It is the retail concentration known as the mailorder house that now most alarms the 1,250,000 retail merchants of this country, especially those of the smaller towns and the rural districts. Here the problem is not only one of prices, but also of practices. In the competitive relations of the system with the individual store we have the soulless corporation contesting the field with the individual merchant citizen. He is still the main distributive agency between the ordinary manufacturer and a large part of the consuming population.

"If these large companies are truly economic and able to deliver, with a lighter carrying charge, the goods which consumers must have, and provided they deal fairly, the greater they are the greater good they do; and provided, also, that the process of monopoly does not go so far that their mere size makes them a menace.'

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Thus one of the newest, yet oldest, forms of the trust problem in the mercantile world is stated by W. H. Ingersoll of the American Fair Trade League.*

The ability to render a superior merchandising service under fair competitive conditions and without monopoly advantage-that is the criterion by which any new agency in large-scale enterprise must be tried in business. Our

* Unfair Retail Practices, American Fair Trade League.

earlier trusts practiced both to their heart's content. They played foul, and they too often made the rules of the game to suit themselves. Most of the more flagrant kinds of unfairness have meanwhile been given up. But there remain two or three varieties which are widely condemned as unsound in economics and ethics, if not in law as well. These are (1) unnatural price-cutting; (2) discriminatory quantity prices; (3) fraudulent advertising. Each of these may be considered from three standpoints. Is it good business for producer, for merchantdistributor, and for the consumer to become party to a price-cutting program? Taking the community as a whole, Mr. Justice Holmes' dissent in the patent medicine decision of the United States Supreme Court would probably find wide acceptance. "I cannot believe," he insisted, "that in the long run the public will profit by this course, permitting knaves to cut reasonable prices for mere ulterior purposes of their own, and thus impair, if not destroy, the production and the sale of articles which it is assumed to be desirable the people should be able to get."*

5. Quantity Prices and Misrepresentation

In deciding these questions the public is gradually taking the broader view the view of enlightened self-interest. That kind of compe* 220 U. S., 373.

tition which tries to create business by unreasonable price-cutting is a species of fraudulent self-exploitation.

*

(1) Brandeis' reasoning seems to be sound on this score. "To sell a dollar watch (he argues) for sixty cents injures both the manufacturer and the regular dealer, because it tends to make the public believe that either the manufacturer's or the dealer's profits are exorbitant. Such a cut necessarily impairs the reputation of the article, and by impairing reputation lessens the demand." It takes only a few of such cutsales to eliminate the regular dealers. Finding their market despoiled by quotations which mean loss on every unit sold by them, they cancel their contracts with the manufacturer or jobber. Then the industry finds its demand weakened. The factory that was the life of the community shuts down and all because the maker of a standard commodity is denied the inherent equity of seeing that his product, into which he has put his best service to society, is given safe conduct in its journey from factory to consumer.

(2) Discriminatory quantity prices embody a practice quite distinct from the discounts, reductions, or other concessions made to all equally, to the wholesaler or jobber as compared with the retailer. Cost of carrying the stock includes warehousing charges, interest on money, and the like. Whoever renders this service is * Harper's Weekly, November 15, 1913.