other method of differentiating prices with respect to location; (2) the causes for the adoption of the several methods employed and the purposes intended to be served by them; (3) their actual and potential effects upon prices and competitive conditions; and (4) any constructive measures which might be employed to promote greater efficiency, economy, or fairness in the methods of quoting or charging prices."

Information on price making is being gathered through interview and questionnaire and from invoices of manufacturers. In the case of the latter the offices of dealers and manufacturers are visited and the price data transcribed directly from original or duplicate documents.

Progress in the work of this inquiry has been retarded by the prior claims of other inquiries as well as by the negotiations with firms and associations frequently necessary before access to their records could be secured or information requested was furnished. Nevertheless, questionnaires have been received from a considerable proportion of the trade associations covering manufacturing lines and from individual manufacturers in all the more important industries, while invoice records have generally been made available to the commission's agents. This information variously secured is being assembled for further study.

DU PONT INVESTMENTS INQUIRY

On July 29, 1927, the chief economist was directed to institute an inquiry into the acquisition of stock of the United States Steel Corporation and of General Motors by the E. I. du Pont de Nemours Co. This inquiry was completed and the report submitted to the commission just after the close of the fiscal year ended June 30, 1928.

Some time after this work was started the Du Pont Co. disposed of its interests in the United States Steel Corporation, which was the principal condition provoking the inquiry. The effects of such intercompany stockholdings were also covered by this study.

Certain phases of the inquiry have been referred to the legal division for further investigation.

CHAIN STORES

On May 3, 1928, the Senate, by Resolution 224, directed the commission to make an investigation of the chain-store system of marketing and distribution. Under the resolution, which is broad in scope. the commission is to ascertain and report on, among other things, the extent, if any, to which consolidations of chain stores have been effected in violation of the antitrust laws and the extent to which such consolidations are susceptible to regulation under the present

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laws; the extent, if any, of control of commodities by chain stores; the existence, if any, of unfair competitive methods, agreements, conspiracies, or combinations in restraint of trade; the advantages or disadvantages of chain-store distribution in comparison with those of other types of distribution as shown by prices, costs, profits, and margins, quality of goods and services rendered by chain stores and other distributors or resulting from integration, managerial efficiency, low overhead, or other similar causes; the parts played in the growth of chains by actual savings in costs of management and operation and quantity prices available only to chain stores, and whether or not such quantity prices constitute a violation of either the Federal Trade Commission act, the Clayton Act, or any other statute. The commission is also to recommend legislation, if deemed needful, in respect to regulation of chain-store distribution and quantity prices. Work on this inquiry was undertaken shortly after the passage of the resolution. The comprehensiveness of the resolution and the intricacies of the problem, due to the wide ramifications of the chainstore system of distribution, necessitated a thorough canvass of the task to be undertaken. At the close of the fiscal year plans for conducting the active work on the inquiry were being developed.

BLUE-SKY SECURITIES

On July 27, 1927, the commission adopted a resolution, which, after setting forth that, in cases that had come before it, the commission had found inadequate present legislative remedies in respect to so-called blue-sky securities, that the commission had formerly made a general inquiry into the subject, but no report had been published, and the practice of selling worthless securities is an economic evil which should be promptly remedied, if practicable, directed that the chief economist to inquire further into the practice of selling such securities; the legislative, administrative and other methods employed to abate the evil and the results thereof; together with other matters covered by the previous inquiry in order to bring the same up to date; and to report thereupon to the commission.

Work on the foregoing resolution was got well under way in the latter months of 1927, and work in the field was completed early in 1928. Considerable progress has been made in the preparation of text for the report, the completion of which has been delayed owing to the necessity for using as large a number of the commission's force as possible on more urgent work in connection with the power and gas utility investigation ordered by the Senate.

CHIEF COUNSEL

OUTLINE OF PROCEDURE

The chief counsel is the legal adviser to the commission and, among other things, is charged with the duty of supervising the preparation of complaints and other legal process directed by the commission, the prosecution or defense of all cases before the commission and in the courts, and of the work of the export-trade section. He is also specifically charged with the duty of conducting the public hearings and certain other phases of the public-utilities investigation under Senate Resolution No. 83.

It is only after the most careful scrutiny of the record that the commission issues a complaint. The commission must have, in the language of the statute, a reason to believe that the law has been violated and that the public interest is involved before complaint issues. The complaint is the specified statutory means provided to bring before the commission a party charged with violation of laws within its jurisdiction. Unlike the preliminary inquiries and applications for complaint, which are held strictly confidential, the complaint and answer is a public record, and with the issuance of a complaint there is set up the formal docket, which, unless otherwise specifically directed by the commission, is open for public inspection after the complaint has been served upon the respondent.

A complaint is issued in the name of the commission in the public interest. It names a respondent and charges a violation of law, with a statement of the charges. The party first complaining to the commission is not a party to the complaint when issued by the commission; nor does the complaint seek to adjust matters between parties. It is to prevent unfair methods of competition for the protection of the public.

The commission's rules of practice and procedure provide:

(1) In case of desire to contest the proceeding the respondent shall, within 30 days from the service of the complaint, unless such time be extended by order of the commission, file with the commission an answer to the complaint. Such answer shall contain a short and simple statement of the facts which constitute the ground of defense. Respondent shall specifically admit or deny or explain each of the facts alleged in the complaint, unless respondent is without knowledge, in which case respondent shall so state, such statement operating as a denial. Any allegation of the complaint not specifically denied in the answer, unless respondent shall state in the answer that respondent is without knowledge, shall be deemed to be admitted to be true and may be so found by the commission.

(2) In case respondent desires to waive hearing on the charges set forth in the complaint and not to contest the proceeding, the answer may consist of a statement that respondent refrains from contesting the proceeding or that respondent consents that the commission may make, enter, and serve upon 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 commisson, 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, 1928

That

The work of the export-trade section is reported at page 94. of the public utilities investigation is described at page 1. The volume of other work of the chief counsel's office is concisely expressed in the statistical tables to be found on pages 87 to 93 of this report. Complete synopses of complaints disposed of by orders of dismissal or orders to cease and desist entered during the year and all cases pending at its close will be found in Exhibits 6 and 7, pages 137 and 155.

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 business practices.

All but 5 of the 66 complaints issued during the year charged unfair methods of competition violative of section 5 of the Federal Trade Commission act. Violations of section 7 of the Clayton Act by acquisition of capital stock of competing concerns were charged in five complaints. There was one complaint issued charging violation of section 3 of the Clayton Act (tying contracts). This complaint also includes a charge of violation of section 5 of the Federal Trade Commission act. Violation of section 8 of the Clayton Act (interlocking directorates) was charged in one complaint, which complaint is among those containing charges of violation of section 7 of the same act. In one complaint charges were made of violation of section 5 of the Federal Trade Commission act as extended by section 4 of the export trade act. No complaints under section 2 of the Clayton Act (price discrimination) were issued during the past fiscal year.

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

Conspiracy to fix prices-Restraint of trade-Violation of section 5 of the Federal Trade Commission act.-A complaint on this subject was issued by the commission on May 22, 1928, against 55 manufacturers of fire brick and 4 individuals connected with such business. The complaint charges them with entering into an agreement, combination, and conspiracy, and using concerted action among themselves and with others to restrict, restrain, and suppress competition in the sale of fire brick for the purpose and with the intent and effect of unduly enhancing the prices of fire brick and to bring

1 Attention is especially invited to the fact that most of these complaints are pending, and consequently the commission has reached no determination as to whether the law has been violated as charged therein.