ECONOMIC DIVISION

The economic division consists of a staff of experienced economists, professional accountants, and statistical clerks. The division is the continuation of the former Bureau of Corporations established in 1902 and absorbed by the Federal Trade Commission in 1915 in accordance with the provisions of its organic act. Its function from the beginning has been the investigation of general business conditions, and especially those relating to monopoly, restraints of trade, and unfair methods of competition. The results of these numerous inquiries have been given out in reports of the commission, often with the commission's specific suggestions for remedial legislation, or for the constructive self-correction of abuses by the industry involved.

These inquiries, as provided by law, have been initiated by the direction of the President or of either House of Congress, or have been undertaken by the commission on its own motion.

The work of the economic division is carried out primarily under the provisions of section 6 of the Federal Trade Commission act, which reads as follows:

SEC. 6. That the commission shall also have 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 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 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.

During the fiscal year ending June 30, 1925, inquiries on the following subjects were conducted:

Premium Prices of Anthracite, work initiated by the commission in connection with disturbed market conditions in 1923-24.

Packer Consent Decree, Senate Resolution 278 (68th Cong., 2d sess.). Kitchen Furnishings Industries, Senate Resolution 127 (67th Cong., 2d sess.) (third volume of House Furnishings Report).

War-time Profits and Costs of the Steel Industry, work initiated by the commission, utilizing data collected during the war.

Cotton Merchandising Practices, Senate Resolution 252 (68th Cong., 1st sess.). Empire Cotton Growing Corporation, Senate Resolution 317 (68th Cong., 2d sess.).

Grain Trade, work initiated by direction of the President and subsequently continued by the commission on its own motion (sixth and seventh volumes). National Wealth and Income, Senate Resolution 451 (67th Cong., 4th sess.). Bread and Flour Industries, Senate Resolution 163 (68th Cong., 1st sess.). Electric Power Industry, Senate Resolution 329 (68th Cong., 2d sess.). Grain Middlemen's Profits, work initiated by direction of the commission. (Discontinued.)

At the close of the year the economic division had as uncompleted work only the inquiries into the electric power industry, the bread and flour industries, and the grain trade. This does not take into consideration two other inquiries directed by the Senate-namely, one into open price associations (S. Res. 28, 69th Cong., special session) and another into cooperative organizations (S. Res. 34, 69th

Cong., special session)-because no formal order was given to initiate them on account of certain questions arising under the appropriation act for the fiscal year ending June 30, 1926.

ANTHRACITE

During the latter part of the fiscal year the commission ordered that the report on premium prices of anthracite be submitted to the Congress and made public. The report was issued under date of July 5, 1925.

This report deals primarily with the premium prices of anthracite charged by certain operators and the premium prices and gross profits of anthracite wholesalers following the brief strike in the latter part of 1923. Premium prices of anthracite occur in times of actual or anticipated shortage and especially when there is a panic demand. This commission first inquired into the problem in 1916-17, and in the panic market of August, 1923, the United States Coal Commission initiated a somewhat similar activity. On the termination of all of the Coal Commission's work in September of the same year this work was taken up by the Federal Trade Commission, which undertook to gather and publish from week to week data showing the extent to which the premium prices of anthracite were due to profit taking by the wholesalers. Current monthly data were also secured from mine operators covering the quantities of anthracite sold in interstate commerce and the prices received therefor. The current publication of this information, which had a restraining influence on speculation, is compiled and analyzed in this report.

The report also considers in some detail the efforts of the Department of Justice to disintegrate the anthracite combination, and points out additional steps which would apparently tend to restore the industry to a normal competitive basis, as well as certain constructive measures which would aid in preventing the recurrence of high premium prices.

A significant fact with respect to the claimed high costs of anthracite in periods of panic demand is pointed out in this report. Attention is called to the wide variations in mining cost in the different mines or different parts of mines of a given company, and it is stated that "the exploitation of the higher-cost workings makes possible the showing of high costs for a small percentage of the total production and may be used as a justification of high prices." As the report indicates, extremely high costs have been claimed by some companies as an excuse for charging excessively high prices, although these same companies in times of dull demand had been selling anthracite freely at the same prices as other companies.

Some of the principal points developed in this report on the premium prices of anthracite are contained in the following excerpts:

A long period of monopolistic combination in the anthracite industry (now largely abated by recent judicial decrees) has resulted in concentration in the ownership of coal lands, in the failure to increase mining capacity adequately so that production has not developed with demand, in the establishment of an unduly high general price level, and in times of temporary or apparent shortage in high premium prices at the mine which have encouraged and facilitated the taking of excessive profits both by wholesalers and retailers.

In such times of temporary or anticipated shortage the independent companies have sold at prices higher by widely varying amounts or premiums than those announced by the railroad coal companies, while at other times, especially in the dull late spring season, the independents have sold for less than the railroad companies.

These high mine prices have sometimes been alleged to be justified by high mine costs, but such very high costs would indicate either that production policies were arbitrarily conducted to give that result or that the mining conditions were so unfavorable that production should have been discontinued and mining labor diverted to less expensive workings.

The existence of a wide range in the mine prices charged for anthracite in the fall of 1923 enabled wholesalers to exact very large gross profits.

The existence of high premium prices at the mine has also led to speculative sales among wholesalers, thereby further enhancing the price paid by the retailer.

The production of anthracite has not developed with demand. In spite of steadily increasing prices and large untouched coal land reserves of the railroad coal companies, some of which at the present rate of production would last more than a hundred years, the output has remained comparatively stationary for a number of years. In order that the present generation may have an adequte supply of anthracite at a reasonable price, more effective competition must be reestablished. Complete restoration of competition is not only practicable in the anthracite industry, in the opinion of this commission, but, also, is preferable to price regulation, which has often been advocated with respect to this industry.

Among the most promising constructive measures to prevent frequently recurring shortages in the anthracite trade (apart from the education of the consumer in the possible use of economical substitutes) are a further and more effective development of price reductions in the late spring and summer to induce earlier and more regular buying by the private consumers; the development of a public statistical organization of information through which the total demand would be definitely determined and translated into firm contracts and prompt car movements; the systematic development of an earlier and more rational buying program by municipalities and other public agencies; an increase in storage equipment of mining and distributing companies; and the enlargement of mine capacity to meet periods of extraordinary demand.

The greatest obstacle to intelligent action on the part of the public and the Government in the frequently recurring emergencies in the coal trade is the lack of adequate current information particularly with regard to prices, costs of production, and profits. The premium prices of 1923 were the re

sult of an anticipated shortage and a panic demand due largely to general ignorance of the real conditions. * The commission believes, therefore, if the matter is found to be within the legislative power of Congress that some Federal agency should secure and publish currently data on production, prices, costs, and profits in the coal industry.

GASOLINE

The commission's report on the "Increase in Gasoline Prices in 1924," made at the direction of the President and submitted to him on June 4, 1924, has not been printed, except as to the summary. Upon receipt of the report the President referred it to the Department of Justice for consideration in connection with an inquiry into related phases of the petroleum industry which was undertaken by that department. A resolution introduced in the Senate on February 18, 1925, by Senator Trammell, of Florida, requested that the President transmit to the Senate a copy of the report "if not incompatible with the public interest." This request was complied with by the President on February 28. A summary of the report was printed in the Congressional Record of March 3, 1925. Subsequently the commission ordered a limited number of copies of the summary mimeographed for distribution on request.

The full report embraces data on production, stocks, investment, and profits of producers, refiners, and marketers, and a study of competitive conditions in the industry as a whole, with particular reference to the position and activities of the so-called Standard group.

The more important conclusions of the commission were as follows: The buying of crude oil, with the almost autocratic influence in dictating prices generally exercised by some particular large Standard Oil company in each great oil field of the country, is an abnormal condition which appears as a survival in part of the monopolistic régime which prevailed before the decree dissolving the Standard Oil combination. This situation seems to depend partly on the great resources and extensive operations of certain individual members of the former trust, further fortified by advantageous relations with each other, particularly in the transportation and market outlets for oil. In this connection their relations with the numerous Standard pipe lines are perhaps the most important. The small crude-oil producer or purchaser can not ordinarily use these pipe lines, which by law are made common carriers, because the regulations of the pipe-line companies have (for most points of delivery in the East) unjustifiably established 100,000 barrels as the minimum quantity which will be accepted for shipment.

In the sale of gasoline and kerosene a similar abnormal condition is foundnamely, a situation in which some large Standard company in each region (except Oklahoma and Texas) ordinarily determines the price and smaller traders merely follow. This situation is the result of the method by which the business was territorially divided by the old Standard combination among 11 marketing companies. The dissolution decree, in merely breaking the formal bonds between these companies, did not disturb this division of territory.