plete the acquisition of the physical assets of the corporation before the commission files complaint, then the situation is beyond the corrective power of the commission.

The rules of the commission were amended so that in such cases complaint would issue immediately upon completion of the preliminary inquiry and before a hearing by the board of review. However, considerable time is necessary in making the preliminary inquiry and so far as the commission is concerned, the effectiveness of the act has been materially lessened by the decisions referred to above. Since these decisions there have been noted a number of cases where the jurisdiction of the commission has been defeated by the corporation having acquired the capital stock of another company, and then converting the assets of the acquired company either before the preliminary inquiry was completed or before the question as to whether the facts warranted action under section 7 had been considered.

SPECIAL INVESTIGATIONS

Cottonseed.-During the year the inquiry of certain phases of the cottonseed industry authorized by House Resolution 439, approved March 2, 1927, was completed. This inquiry was directed to the question as to whether there was a combination, agreement, or association among the purchasers of cottonseed to fix prices in violation of the antitrust laws. Considerable evidence of cooperation among the State associations composed of the concerns operating crushing mills was secured, but on the whole did not indicate that the price paid for cottonseed was fixed by agreement. Prices received for cottonseed in 1927 were materially higher than those received in 1926. It was also concluded from the inquiry that one of the main causes of dissatisfaction to both the producer of cottonseed and those engaged in its purchase and manufacture is the lack of a uniform system of grading, which subject is being given consideration by the United States Department of Agriculture. The results of the inquiry are incorporated in a report made by the commission to the House of Representatives on March 5, 1928.

Cooperative marketing. The extensive inquiry of cooperative marketing organizations authorized under Senate Resolution 34 (69th Cong., special session), approved March 17, 1925, was also concluded during the year. A report in two parts covering the results of the inquiry was submitted to the Senate April 30, 1928. Part I deals with the growth and importance of cooperative marketing organizations and includes a discussion of the evidence obtained relative to interferences with the formation and operation of organizations of producers. It also includes a brief summary covering the developmnet of State and Federal cooperative law, while Part II

deals with a comparison of data on costs, prices, and practices of cooperatives and their competitors. The investigation shows that in some sections, particularly California, cooperative marketing has been quite successful, while in other parts of the country this form of marketing has met only with varying degrees of success. From the data secured it was concluded that the soundness of cooperative marketing should not be measured by the number of failures or successes of individual organizations, because the system has not been in use long enough to determine whether or not, as against other methods of marketing, it will result finally in bettering the financial and social condition of the producer and also prove a benefit to the general public. The proportion of failures among cooperative marketing associations does not appear to be any greater than among the concerns operating along old-established lines of distribution. When failures occurred they were found to be due primarily in some cases to inefficient management and in others to lack of capital, lack of support of the producers, and other economic conditions. On the other hand, where the association had been in operation over a period of years it was found that the problems of operation, management, financing, and selling had been solved and that as good and in some instances better returns were made to its members than were realized from other methods of marketing. Some evidence was disclosed indicating that private interests in the past had used questionable methods in opposing cooperatives, and that no doubt there would be continued opposition from the interests controlling the better established methods of marketing. It was concluded. however, that the antitrust laws and the Federal Trade Commission act afford a remedy for any unfair practices which may be directed against cooperative marketing organizations.

TRIAL EXAMINERS' DIVISION

OUTLINE OF PROCEDURE

The trial examiners' division, established by the commission on December 1, 1925, functions under the direct supervision of the commission. The duties of this division are subdivided as follows: (1) Presiding at the trial of formal complaints issued by the commission and (2) the settlement of application for complaint by stipulation; the above duties will be considered under the caption "Complaint and "Stipulation."

COMPLAINT

Under the procedure adopted by the commission, a trial examiner presides at the trial of all formal cases, and in the conduct of such proceedings rules on all motions of counsel and the admissibility of evidence and continues the hearing as necessity may require; and at the close of the proceedings the trial examiner makes up the record and prepares the report upon the facts, which said report is served by the presiding trial examiner upon the counsel for the commission and attorney for respondent. The report upon the facts, with exceptions thereto taken by counsel for the commission and attorney for respondent, is the basis for argument at the final hearing before the commission.

STIPULATION

In addition to presiding at hearings in formal cases, the division is also charged by the commission with the settlement of applications for complaint by stipulation, except in those cases where the practice is so fraudulent or so vicious that the protection of the public demands the regular procedure of complaint. This division of the commission affords an agency to administer the commission's present policy providing for the settlement by stipulation of informal cases. This procedure provides an opportunity for the respondent to enter into a stipulation of the facts and voluntarily agree to cease and desist forever from the alleged unfair methods set forth therein, which said stipulation is subject to the final review and approval of the commission.

During the short period since the stipulation rule has been in effect 278 separate respondents entered into stipulations of the facts

with an agreement to abandon the unfair methods of competition and cease and desist forever from the said practices in interstate

commerce.

Stipulation release for publication, after deleting names of parties, up to June 25, 1928, are reproduced on page 182.

The policy of the commission affording respondents an opportunity of disposing of certain cases by stipulation has resulted in a substantial saving in time and money to the Government, as well as to the prospective respondent, and at the same time has immediately eliminated unfair methods and practices from the channels of interstate trade.

From an estimate made by the commission it was determined that the average cost of procedure by complaint, involving the taking of testimony, reporting, and trial, costs about $2,500, while the cost of settling application for complaint by stipulation-thus avoiding a complaint-costs less than $500 per case. The immediate cessation of the unfair practice, however, is of greater importance than the monetary saving involved.

The procedure by stipulation, in the opinion of the commission, has resulted in gradually establishing and perfecting precedents that in the future will greatly facilitate procedure and at the same time eliminate from the channels of trade many unfair business methods that to a large extent have become prevalent, although recognized as unethical but tolerated through usage.

ECONOMIC DIVISION

The work of the economic division represents substantially the functions taken over from the Bureau of Corporations. It consists in ascertaining and interpreting facts relating to the organization, conduct, and results of commercial enterprises, and in recommending constructive or remedial legislative action. Under the Federal Trade Commission act the President or either House of Congress is authorized to direct the commission to make inquiries of this general character and the commission may also initiate them on its own motion. While questions of monopoly or restraint of trade are presumably involved in the former, they are not necessarily involved in the inquiries undertaken on the initiative of the commission.

The results of these inquiries are embodied in printed reports and during the period of its existence the commission has in this manner surveyed a large portion of the industries of the country, and a number of important legislative results are attributable in part at least to the findings of the commission.

During the fiscal year the following inquiries were prosecuted by the economic division:

Electric power.-Inquiry directed by Senate Resolution 329 (68th Cong., 2d sess.), February 3 (calendar day, February 9), 1925.

Petroleum prices.-Inquiry directed by Senate Resolution 31 (69th Cong. 1st sess.), June 3, 1926.

Stock dividends.—Inquiry directed by Senate Resolution 304 (69th Cong., 2d sess.), December 22, 1926.

Bread and flour.-Inquiry directed by Senate Resolution 163 (68th Cong., 1st sess.), February 16, 1924.

Panhandle petroleum.-Inquiry directed by the commission October 6, 1926. Power and gas utilities.-Inquiry directed by Senate Resolution 83 (70th Cong., 1st sess.), February 13 (calendar day, February 15), 1928.

Resale price maintenance.-Inquiry directed by the commission July 25, 1927. Open-price associations.-Inquiry directed by Senate Resolution 28 (69th Cong., special sess.), March 17, 1925.

Lumber trade associations.-Inquiry directed by the commission January 4, 1926.

Price bases.-Inquiry directed by the commission July 27, 1927.

Du Pont investments.-Inquiry directed by the commission July 29, 1927. Chain stores.-Inquiry directed by Senate Resolution 224 (70th Cong., 1st sess.), May 3 (calendar day, May 12), 1928.

Blue-sky securities.-Inquiry directed by the commission July 27, 1927.

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