respondent an order to cease and desist from the violations of the law alleged in the complaint, or that respondent admits all the allegations of the complaint to be true. Any such answer shall be deemed to be an admission of all the allegations of the complaint and to authorize the commission to find such allegations to be true.

(3) Failure of the respondent to file answer within the time as above provided for shall be deemed to be an admission of all allegations of the complaint and to authorize the commission to find them to be true and to waive hearing on the charges set forth in the complaint.

After complaints are issued, the chief counsel is charged with the trial or other proper disposition of all cases. In a contested case the matter is set down for the taking of testimony before a trial examiner upon due notice to all parties respondent. After the taking of testimony and the submission of evidence on behalf of the commission in support of the complaint, and on behalf of the respondent, the trial examiner prepares a report of the facts for the information of the commission, counsel for the commission, and counsel for the respondent. Exceptions to the trial examiner's report may be made by either counsel for the commission or counsel for the respondent. Within a stated time after receipt of the trial examiner's report briefs are filed and then the case comes on for final argument before the full commission. Thereafter the commission reaches a decision either sustaining the charges of the complaint or dismissing the complaint. If the complaint is sustained, the commission makes a report in which it states its findings as to the facts and conclusion that the law has been violated, and thereupon an order is issued requiring the respondent to cease and desist from such practices. If the complaint is dismissed, an order of dismissal is entered.

Respondents against whom orders to cease and desist have been directed are required within a specified time, usually 60 days, to report in writing the manner in which they are complying with the provisions of the commission's order. If a respondent fails or neglects to obey the order while the same is in effect, the commission may apply to a United States Circuit Court of Appeals for enforcement thereof. Respondents may likewise apply to a United States Circuit Court of Appeals for review of the commission's orders, and these proceedings may be carried by either party on certiorari to the Supreme Court of the United States for final determination.

All court proceedings are supervised by the chief counsel through the assistant chief counsel in charge of appellate work.

SUMMARY OF WORK, 1927

The volume of work of the legal division is concisely expressed in the statistical tables to be found on pages 104 to 108 of this report. Complete synopses of complaints disposed of by dismissal or orders

to cease and desist entered during the year and all complaints pending at its close will be found in Exhibits 6 and 7, pages 131 to 177.

CHARACTER OF COMPLAINTS...

In the course of the performance of its duties the commission is called upon to protect the public from unfair and monopolistic practice.

All but 2 of the 76 complaints issued during the year charged unfair methods of competition. Violations of section 7 of the Clayton Act by acquisitions of stock of competing concerns were charged in two complaints. There was one complaint charging violation of section 2 of the Clayton Act (price discrimination). This complaint also includes a charge of violation of section 5 of the Federal Trade Commission act. No complaints charging violation of section 3 (tying contracts) or section 8 (interlocking directorates) of the Clayton Act were issued during the fiscal year here reported on.

Herewith are presented brief summaries of the charges contained in a few of the complaints issued by the commission during the past fiscal year. These complaints are fairly representative.1

Price discrimination-Violation of section 2 of the Clayton Act and section 5 of the Federal Trade Commission act.-On May 17, 1927, certain dominant manufacturers of range boilers having their plants in Pennsylvania, Ohio, Illinois, Michigan, and Tennessee, were charged in a complaint issued by the commission with concurrently establishing and maintaining a certain sales policy with the alleged intent and purpose to destroy two local producers and competitors in the Pacific coast market. These two competitors both of which from their geographical location are unable to buy the raw materials used in the manufacture of range boilers at a price which compares favorably to the price respondents pay, as said raw materials, consisting of sheet steel, rivets and spelter, are produced in the Eastern States. As the cost of transportation of the raw materials is reflected materially in the costs of both respondents and their competitors, the sales policy of respondents works to the disadvantage of their competitors. This sales policy is as follows: For one fixed and uniform lump sum each respondent sells its range boilers and pays the actual cost of transportation thereof to all markets in all parts of the United States. Under this policy respondents sell their range boilers in the Pacific coast market not only below their own costs, but also below the costs of the above-named competitors. The loss thus

1 Attention is especially invited to the fact that these complaints are pending, and consequently the commission has reached no determination as to whether or not the law has been violated.

sustained by respondents in the Pacific coast market is recouped by them out of the profits derived under said uniform sales policy from their sales in the eastern market, which profits are sufficient to give each respondent a satisfactory net profit on its business as a whole.

It was also alleged in the complaint that the effect of respondents' uniform sales policy is to (a) lessen and eliminate competition and create a monopoly of the Pacific coast market; (b) to fix an arbitrary cost to purchasers which has no relation to costs of production, sales, transportation, or profits on such sales; (c) to levy upon a majority of purchasers an additional burden to reimburse respondents for losses they incur to accomplish their unlawful purpose to destroy competi tion; (d) to unlawfully discriminate against purchasers and deprive them of the advantages of competition and the proximity to sources of supply; and (e) to violate section 5 of the Federal Trade Commission act and section 2 of the Clayton Act.

Answers to the complaint have been filed denying violations of the law, upon which issues the case is pending.

Resale price maintenance-Violation of section 5 of the Federal Trade Commission act.-A representative complaint on this subject is the one issued by the commission on May 10, 1927, in which a manufacturer of watches and its subsidiary distributors were charged with practicing unfair methods of competition by enforcing a merchandising system of establishing and maintaining specified uniform prices at which its watches shall be resold between dealers and to the consuming public throughout the country. In order to enforce said system and prevent dealers from reselling these watches at less than the uniform resale prices so fixed, it is alleged that respondents employed the following means, among others: (a) Established and issued uniform minimum prices at which wholesalers shall resell the watches to retail dealers and required said wholesalers to sell exclusively to retail dealers; (b) established and issued uniform minimum prices at which retailers shall resell the watches to the public; (c) cut off sources of supply of dealers who failed to sell at the prices fixed by respondents; (d) placed upon their business stationery and the containers of the individual watches a notice and warning to the effect that the sale of such watches at less than the minimum wholesale and retail prices so fixed constituted a damage to the trade-mark of and the good will in the name of the manufacturers, together with a statement that the buyer admits such damage and that respondents will prevent such damage and protect said trade-mark and good will through legal proceedings; (e) made it generally known to the trade that the respondents require dealers to maintain and enforce the resale prices which they fixed, and refuse to sell to price cutters;

(f) entered into agreements with dealers to maintain and enforce the fixed prices; (g) persuaded and coerced, by agreement and intimidation wholesale and retail dealers who cut prices or otherwise failed to adhere to respondents' price-fixing scheme, to refrain from selling at cut prices, and to otherwise abide by said scheme of price fixing and the methods of carrying same into effect; (h) policed the trade to see that their prices are adhered to by investigating and securing information of price cutting or other violations of their scheme; (i) employed a system of serial numbers stamped upon the containers of the watches by means of which they could and did trace watches. through the channels of trade to the consuming public and thus identify wholesale and retail dealers who reduced prices, and otherwise detect violations of their scheme of price fixing; (j) exacted, by inducement, coercion, and threats of lawsuits and of cutting off source of supply, promises and assurances from price cutters that they will in the future maintain the fixed prices and refrain from selling to other price cutters; (k) exacted from dealers promises that they will maintain respondents' fixed resale prices as a condition to opening new accounts or of continuing to deal with such dealers; and (1) kept what is commonly known as a black list of those who failed to abide by their scheme of fixing and maintaining resale prices. It is also alleged in the complaint that the effect of these practices is to suppress competition, to prevent dealers from reducing the price of these watches as they may desire, and to deprive the consuming public of those advantages which they would obtain from the natural and unobstructed flow of commerce in such watches under conditions of free competition.

Issue was joined by respondents filing their answers, upon which the case was pending at the close of the fiscal year.

Conspiracy to fix prices-Boycott section 5 of the Federal Trade Commission act.-A typical form of this method of competition is set out in a complaint issued by the commission on July 7, 1926, against an organization composed of local associations of retail druggists comprising some 3,200 retail druggists. It is charged in the complaint that respondent undertook to secure the adoption and maintenance by manufacturers, jobbers, and wholesalers of drugs and sundries of uniform resale prices for their respective products and the adherence to such resale prices by retail druggists; and further to influence and induce retail druggists not to purchase goods from manufacturers, jobbers, and wholesalers who failed to adopt such policy of resale price maintenance, thereby coercing the manufacturers, jobbers, and wholesalers to adopt same. It was alleged that respondent sought to effect these purposes: (a) By agreements by manufacturers, jobbers, and wholesalers to main

tain certain resale prices which in some cases were suggested by respondent; (b) by cooperation among the druggists in refusing to deal in goods not sold under such resale price policy and promising manufacturers and dealers assistance in resisting price cutting; (c) by keeping retail druggists informed of those manufacturers, jobbers, and wholesalers who adopted the resale price policy; (d) by the use of "courtesy cards" issued by the respondent on the application of manufacturers, jobbers, and wholesalers for use of their salesmen introducing the holder as representing a "friendly" concern, said "courtesy cards" being issued to manufacturers, jobbers, and wholesalers who have agreed to maintain certain wholesale prices for their products and commodities, and said cards being designed and intended to influence and induce the retail druggist to buy only from those to whom such cards have been issued and to boycott other manufacturers, jobbers, and wholesalers; (e) by threatening retail druggists with bodily harm and that unless they agree to maintain the resale prices adopted they would be investigated by a State board of pharmacy and the narcotic and prohibition authorities, and that unless said retailers joined the combination they would not be able to purchase from manufacturers who had joined; (f) by publishing lists of manufacturers, jobbers, and wholesalers to whom "courtesy cards" had been issued. It was also alleged that respondent had, to a substantial extent, procured the boycotting by retail druggists of manufacturers, jobbers, and wholesalers who have not conformed to the resale price maintenance policy advocated by respondent, all of which is charged to be an unlawful restraint of trade and unfair methods of competition.

Answer to the complaint was filed by respondent denying the allegations thereof. At the close of the fiscal year, testimony was being taken with respect to the issues raised.

Commercial bribery-Violation of section 5 of the Federal Trade Commission act.-A typical complaint on this subject is the one issued October 15, 1926, against a manufacturer of disinfectants, insecticides, and germicides and distributor thereof to various departments, boards, and administrative offices of State, county, and municipal governments throughout the United States having charge and control of public funds used in purchasing supplies for public institutions, such as jails, penitentiaries, almshouses, schools, and hospitals. It was charged in the complaint that in soliciting and securing business from the purchasing officials of such institutions, respondent made it a practice for more than 10 years to offer and give to said officials, and to others deemed as having influence with such officials, premiums or gratuities to induce the purchase or as a reward for having purchased the goods of respondent in preference to the goods of respondent's competitors; that such offers and gifts