« ForrigeFortsett »
would show up under the spotlight of industry and public awareness of the problem, the better to be attacked by the Commission's mandatory processes.
The guides augment the existing voluntary compliance program whereby trade practice rules reflecting the law's requirements are promulgated for a particular industry. The trade practice rules provide guidance for an industry at all points covered by the FTC's laws, whereas the guides are directed at particular sore spots.
One of these was automobile tire advertising in which names and descriptions of different grades of tires deceive the public. A 12-point guide was remarkably successful in inducing tire manufacturers to correct their labeling and advertising, and has likewise influenced the pattern of retail tire advertising to a considerable degree.
At the fiscal year's end, the Commission was readying an even more ambitious guide designed to halt fictitious pricing of all goods sold in interstate commerce. This guide also would support an organized effort by private groups devoted to honest advertising so that they might simultaneously attack the same evil at a local level where the FTC lacks jurisdiction.
A valid conclusion to be drawn from these efforts is that the Commission recognizes that its mandatory processes alone are hard put to halt unfair competition in an economy as vast as ours-whose adver tising bill alone is about $11 billion. For a staff of 738, the shee volume of formal actions needed to stop all significant violations o the law poses an awesome task. However, the Commission by givin new emphasis to its original function to inform businessmen aggre sively on the requirements of the law-plus a maximum effort to ere guideposts in the form of adversary proceedings against law viol tors-is achieving the purposes Congress intended for it.
Without effective action against violators of the law, efforts to obta voluntary compliance with it would be fruitless. A businessman w is persuaded to forego illegal methods of competition will not l remain a convert if his uncooperative competitor is permitted to und cut him by illegal means. Therefore, the Commission's mandat actions become all the more important, not only in combatting particular illegality at issue but in giving support to those willin cooperate in keeping their own houses in order.
Both in numbers and significance, the Commission's casework continued to mount. Formal complaints issued in fiscal 1958 incr 46 percent over those issued in fiscal 1957-from 242 to 354. to cease and desist from illegal practices, the increase was 52 perc from 179 to 273. These increases were achieved with fewer empl (738 compared to 744).
Fiscal 1958 showed increases of 56 percent in antimonopoly plaints and 45 percent in antimonopoly orders compared wi
previous year. The compelling factor in case selection was the public interest involved.
Evidence of this is the fact that during fiscal 1958 the Commission was prosecuting more alleged illegal mergers than ever before in its history. In enforcing section 7 of the Clayton Act (the antimerger law), 7 new complaints were issued, 3 orders of divestiture obtained, and 12 other cases were in various stages of litigation. The respondents included the Nation's second largest producer of paper and paper products, Crown-Zellerbach Corp., which was ordered to divest itself of a major competitor it had acquired. Another order directed the Nation's No. 1 producer of coin-operated vending machines to give up exclusive patent and trade-mark rights it had obtained by acquiring a major competitor. Meanwhile complaints were issued challenging acquisitions by the country's second largest chemical company, the No. 2 sugar refiner, the Nation's leading producer of soap and detergent products, a major producer and manufacturer of aluminum products, and a multimillion dollar food processor and retailer.
The greatest number of antitrust cases brought during the year attacked illegal discrimination in prices and promotional allowances and services. Outlawed by the Robinson-Patman Amendment to the Clayton Act, these discriminations accounted for 61 complaints and 39 orders during fiscal 1958.
Among the corrective actions taken in this field, the Commission issued cease and desist orders prohibiting price discrimination by one of the Nation's leading breweries, by two members of the dairy industry, by a large sugar company, and by certain distributors of automotive parts, as well as bringing complaints against three others. In addition, complaints were leveled at three major producers of electric shavers charging that they had given better prices and disproportionate advertising allowances to certain favored customers. Another major case challenged favoritism toward large chain stores in the form of lower prices and higher allowances by the largest distributor of dairy products in the United States.
Similar discrimination in granting illegal discounts and allowances in lieu of brokerage was attacked in 18 complaints against various packers and brokers in the seafood industry. In the food products field, the Commission also attacked the practice whereby food brokers "split" their customary commissions with buyers or receive illegal brokerage fees on purchases made for their own accounts. A variation was a complaint issued against a wholesale grocers' cooperative and its 35 wholesaler members on grounds they had received unlawful brokerage payments on direct purchases of food and grocery products.
Illegal promotional allowances came under heavy fire, and the targets included 16 nationally known producers of food and grocery products who sought to favor large supermarket chains. The result
was that 13 were ordered to cease and desist; the other 3 still were in trial at the year's end. Meanwhile complaints alleging discriminatory promotional allowances were served on three major tobacco companies and a half dozen large concerns producing miscellaneous products such as brassieres, watches, and cameras.
Still another form of favoritism was attacked in a complaint against the world's largest manufacturer of shoes. The International Shoe Co. was ordered to stop giving financial benefits to shoe retailers who agreed not to handle competitors' products. Similar actions to protect retailers from having to deal exclusively in a manufacturer's or distributor's products were brought against one of the Nation's leading oil companies, a major supplier of vitamin and mineral supplements, and a New England distributor of liquefied petroleum gas.
Among other outstanding antimonopoly actions taken during the year was a successful crackdown on illegal price-fixing in the wes coast tuna industry whereby six associations of tuna boat owners, thre fishermen's and cannery workers' unions, and the California Fish Can ners Association and its members accepted orders to cease and desis from the pricing practices they had been using. In another orde the Asheville Tobacco Board of Trade was made to stop monopolizi the tobacco auction warehouse industry in Asheville, N. C. The atta continued with complaints against price-fixing in the gummed pap floor covering, diesel engine parts, gasoline, and jewelry industri For example, a jewelers' trade association, with 4,000 members, charged with concertedly fixing uniform price markups on silverw as well as inducing increased discounts from silverware manufactur A characteristic of antitrust actions is that more often than they are too complex from a legal and financial standpoint to be un stood readily by most laymen. Moreover, because such actions are cerned with business practices at least once removed from the retail sale of products and services, the ordinary consumer t little notice of them. His indifference becomes all the more u standable because only rarely does an individual action have a mediate and conspicuous effect on retail prices. However, the of the Commission's antitrust work is cumulative not only in co ing but in discouraging monopolistic practices. That this eff accepted with little concern and less knowledge by most layme not detract from its importance, for it provides a vital defense f system of free enterprise.
The Commission's actions against deceptive practices, on th hand, are more readily understood, and the fiscal year saw an i sive variety of advertising claims attacked with complain orders.
Nearly a third of these involved fictitious pricing of merc Here the evil is particularly dangerous by reason of its insidi
At first glance it would seem that a merchant commits only a trifling offense by advertising goods at a reduction from a former price that is fictitiously high. Yet, the effect of such advertised "bargain" prices is to force competitors to the same kind of trickery. A leak in the dike of advertising integrity thus gains in volume, with a potential of inundating public confidence in advertised claims. Should this occur in any important degree, the effect would be dire indeed, for advertising not only buttresses all but provides vital support for the developemnt of new business products. In short, the Commission does not intend to permit the policing of fictitious pricing to become a "horseshoe nail for the want of which a kingdom is lost."
In numbers of complaints and orders, the Commission's efforts to halt deception were greatest in the fields of wool and fur labeling. New actions to prevent mislabeling of furs rose more than 70 percent over those taken in fiscal 1957, while the 36 complaints aimed at improper labeling of wool represented a 38 percent increase over the previous year. This step-up in activity resulted not only from a strengthening of the staff of fur investigators but as a result of increasingly competitive conditions both in the wool and fur fields. In the manufacture of wool products, tighter price competition has tempted many makers to increase the percentages of substitute materials and fibers of lower quality and cost without endangering sales by noting these percentage changes on the labels. Also, the FTC's complaints have challenged an excess of optimism in the labeling of such costly specialty fibers of cashmere, vicuna, and alpaca. As for furs, the principal sinning has been a combination of fictitious markdowns in price plus advertising and labeling that misrepresents tipdyed or foreign mink to be high-grade domestic quality.
A novel scheme that prompted issuance of seven complaints is the so-called advance fee real estate racket. Here the owners of propertyquite often elderly people who plan to retire-have advertised unsuccessfully their farms or businesses for sale. These advertisements are seen by promoters who thereupon telephone the would-be sellers and advise them that the promoters have clients willing to pay not only the asking price but more. After payment of a quick advance fee to clinch this "opportunity," the would-be sellers learn to their dismay that they have bought no more than ineffective advertising in a property-listing bulletin. The advance fee is not refunded.
As for the rest of the Commission's actions in the deceptive practice field, the variety was as wide as the ingenuity and conscience of the promoters. For example, complaints were issued challenging advertising that would lead the public to believe: that reprinted books under new titles were fresh from an author's pen; that hair growers could restore a luxurious growth in all cases; that watches with 1 or 2 jewels contained at least 17; that certain contact eyeglasses
offered day-long comfort, were unbreakable, and provided eyes with superior ventilation; and that a certain grass sold by mail order multiplied itself 50 times during a summer without weeds. In addition, the Commission moved against a score of old favorites such as the cures for arthritis and rheumatism, the collection agencies posing as dispensers of largesse, and the sellers of cookware who disparage competing products as poison pots, and vending machines whose amazing profits need but the gathering to assure comfort and security for the credulous.
To the formal cases aimed at halting deceptive practices can be added 146 informal stipulations-as compared to 105 in fiscal 1957— whereby individuals and firms agreed to stop practices which the FTC considered to violate the laws it administers. This procedure, which saves the time and expense of formal litigation, is employed when the Commission has reason to believe that no sterner measures are required to stop the objectionable acts. The principal target here is false advertising, and a close check is maintained on whether the stipulated agreements are kept.
In addition to litigation against individual respondents, the Commission continued its efforts to aid entire industries to abide by the laws it administers. This involves analyzing the particular industry's practices to determine which might be illegal and to identify and prohibit them by trade practice rules. Once issued, the rules ar administered to assure compliance with them and are revised as neces sary to keep them up to date. At the end of fiscal 1958, trade practic rules were in force for 159 industries.
In the field of economics, the Commission approved what was lat to be printed as a 361-page report on the $330 million a year an biotics industry. This study, begun in early 1956, succeeded presenting the first comprehensive picture of an industry wh formative years had necessarily been hidden by wartime secrecy then, due to rapid new developments, had raced ahead of compet economic analysis. As the report neared completion, the Commis directed that a legal investigation be conducted simultaneousl determine whether patent licensing arrangements among m facturers of the so-called "broad spectrum" antibiotics were ille monopolistic, resulting in excessively high prices to the public. investigation was to result in the issuance, a month after the fisca ended, of complaints against six corporations on charges of 1 obtained a vital patent through misrepresentation and the having conspired to restrain trade and fix prices.
The Commission's vigorous law enforcement and the result crease in orders to cease and desist has required an ever greate to secure compliance with these orders and has caused the Com to become engaged in a considerable amount of court litigation