Resolved, That an inquiry shall be undertaken immediately by the commission in strict and full compliance with the terms of the said resolution and that in the prosecution of said inquiry the commission shall rely on and employ the powers conferred on it to make investigations at the direction of either House of Congress, and any and all powers conferred upon it by law to conduct inquiries on its own initiative or otherwise and any other powers legally available to it, whether contained in its organic act or elsewhere, which may conduce to a diligent and complete performance of the ends and purposes set forth in said resolution.

TRADE PRACTICE CONFERENCE DIVISION

The division of trade practice conferences is charged with the duty of coordinating and facilitating the work incident to the holding of trade practice conferences, of providing for specialized direction thereof, of extending the scope of such work within its proper sphere, of providing for immediate action in cases of violation of trade-practice rules, of observing and studying the working of such, and of encouraging closer cooperation between business as a whole and the commission in serving the public.

The work of this division has increased enormously during the past fiscal year. Since the last annual report, trade practice conferences were held for the following industries: Motion picture, golf ball, edible oil, shirting fabrics, fur, heavy sheet glass, hickory handle, millwork, wax paper, flat glass, cottonseed oil mills, paint, varnish and lacquer, rebuilt typewriters, and publishers of periodicals. Preparatory work upon applications for trade practice conferences for numerous other industries had, at the end of the fiscal year, reached various stages of completion.

Never in the history of American business has there been a time when self-regulation has received more intensive consideration. By "self-regulation," as used here, is meant the adoption and adherence to workable rules prescribed by an industry for the regulation of its own business conduct with due regard for the public interest.

If an industry is capable of self-regulation, the trade practice conference procedure of the Federal Trade Commission affords the most effective method yet devised to accomplish this end.

In dealing with self-regulation we are not dealing with a new subject. For many years industry has attempted this with varying degrees of success, the degree of success attained in any industry being readily measured by existing competitive conditions therein. If these conditions are all that can be reasonably desired, the success attained is complete. If, however, practices still exist which result in unfairness or are otherwise bad, previous attempts at self-regulation in that particular industry have failed.

Trade associations, "institutes," the United States Chamber of Commerce, and business organizations in other forms have done, and are doing, excellent work in this respect. Competitive conditions in many industries are being studied and intelligently analyzed, codes are being adopted, much money is being expended in educating industries for the work of self-regulation, but when faults are discovered and rules adopted for their correction, it remains for the trade practice

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conference procedure to supply, in a measure at least, an element which heretofore has been completely lacking—namely, enforcement. Self-regulation without rules would be impossible and rules without some power of enforcement make self-regulation often a mere expensive gesture. The fact that some power rests, as it does, in an impartial, disinterested governmental body obviates the necessity of frequent use of such power. This is demonstrated in that of more than 300 rules adopted by industries in trade practice conferences the power of the Federal Trade Commission has not been invoked with reference to a dozen of these. The complete study of the effect of past conferences now being made by the division of trade practice conferences may change these figures or disclose some additional reasons, but irrespective of the showing on final analysis the fact remains that the mere probability that any rule may be enforced adds materially to its general observance.

The following is a brief summary of trade practice conferences for the industries named. Complete reports of each conference, and the resolutions passed, may be had upon request to the commission.

MOTION-PICTURE INDUSTRY

During the week of October 10, 1927 a trade practice conference was held for the motion-picture industry in the assembly room of the Bar Association of the city of New York. The conference was conducted by Abram F. Myers, commissioner, assisted by M. Markham Flannery, director of trade practice conferences.

The industry, consisting of producers, distributors, and exhibitors, was represented in practically its entirety.

The resolutions adopted by the industry were divided into four groups. The rules appearing in Group I have been approved by the commission. The rules in Group II have been received and accepted by the commission as expressions of the trade. The resolution appearing in Group III is disapproved by the commission. The resolutions under Group IV are held in abeyance without further action of the commission, as the sharp division of the vote cast indicates a total lack of agreement as between the opposing branches of the industry. The rules classified as Group I rules provide for the rewriting of the then existing standard uniform contract between distributors and exhibitors, and for such modifications and changes in the system. of arbitration as a committee of six, named by the conferees, deem necessary; for the elimination of paid commercial advertising from motion-picture exhibitions when films are leased for entertainment purpose and for the elimination of substitution in the matter of stars, directors, and other features influencing selection, which have been specified in orders taken before the particular picture is pro

duced. These resolutions also condemn the use of misleading or salacious advertising; the "bicycling" of films or the surreptitious use of films in theaters other than those contracted for; delaying the return of films for the purpose of securing additional exhibition time without compensation, or by reason of such delay making impossible the shipment of such film to the next customer who has booked it; commercial bribery; the use of films at a theater other than the theaters specified in the contract; failure to report promptly and accurately percentage bookings; agreements among distributors to boycott the exhibitor or to exact higher rental than can be obtained in open competition; and the use of buying power by an exhibitor to buy more films than he can use, for the purpose of attempting a corner, or to force a competing exhibitor out of business, or to force him to sell his theater.

Rules classified as Group II rules condemn fake motion picture production schemes, fake motion picture acting schools, fake motion picture scenario schools, or other dishonest enterprises which trade on the public's ambition to become a part of the motion-picture industry; the practice of transferring titles to theaters without making, at the same time, provisions for transferring existing contracts; and violation of film exchange fire regulations. Other resolutions of this group are intended to raise the moral tone of production to the highest standards; to eliminate deceptive titles; to provide a formula with reference to the selection and rejection of certain story material for picturization; to provide for the establishment and functioning of a nonprofit casting bureau for the purpose of bringing about betterments in working and other conditions with reference to persons known as "extras" employed in the motion-picture studios; to provide a formula for the prevention of exploiting children employed in motion-picture productions; to regulate the lending of employees under contract by one producer to another; and to establish a system of registering titles for the purpose of avoiding duplication and conflict.

The resolution classified as Group III, which was rejected by the commission as being in restraint of trade if carried into effect, sought to prevent competition between regularly established exhibitors of moving pictures with schools, churches, and like institutions by prohibiting producers from contracting for the exhibition of pictures at any place where motion pictures are shown to the public, if such exhibition is found to be in competition with a regularly operated motion-picture theater.

Resolutions classified as Group IV resolutions were intended to provide for: An equal opportunity to all exhibitors to bid for all pictures; relief of exhibitors from what is known as "protection,"

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which consists in requiring an unreasonable length of time to elapse after the first showing of a film before subsequent showings are permitted; relief for exhibitors from producers acquiring, or threatening to acquire, theaters in order to coerce exhibitors to lease pictures or to surrender theater holdings.

On these subjects the conference resulted in no agreement, as the independent exhibitors and the affiliated producer-distributorexhibitor groups seemed hopelessly divided.

In addition to the rules and resolutions referred to an agreed statement of policy proposed by the producer-distributor groups, and accepted by exhibitors, was held in abeyance by the commission until results could be determined from its actual effect upon the motion-picture industry. The provisions of this policy were: The sales method known as block booking shall not be used for the accomplishment of any illegal purpose; no distributor will require as a condition of permitting an exhibitor to lease its pictures that such exhibitor shall also lease pictures of another distributor; if an exhibitor shall claim within a reasonable time prior to the date fixed for the exhibition of any picture included in any block leased by him that such picture will be offensive to the clientele of his theater because of racial or religious subject matter, such claim shall be arbitrated by the board of arbitration of the proper zone, and, if sustained, such exhibitor shall be relieved of obligation to take and pay for such picture; if any exhibitor who has purchased an entire block of pictures offered by any distributor so elects within a reasonable time prior to the date fixed for exhibition of any picture included in such block, such exhibitor may refuse to take such picture by paying one-half of the allocated price thereof, provided that the pictures so rejected out of any block shall not exceed 10 per cent of the number included in such block, and if a rejected picture is resold by the distributor, one-half of the net price received on such resale shall be credited against the exhibitor's obligation in respect of such picture up to the amount of such obligation; reissues will not be included in any block with new pictures; news reels and short subjects will not be included in any block with features, and the lease of news reels or short-subject blocks shall not be required as a condition of being permitted to lease feature blocks or vice versa; the matters dealt with by paragraphs 3 and 4 shall be covered by appropriate provisions to be included in the new standard form of

contract.

SHIRTING FABRICS INDUSTRY

William E. Humphrey, chairman of the commission, conducted a trade practice conference for the shirting fabrics industry at the New York office of the commission on December 10, 1927, assisted by