tion which will of itself solve their ills. Business is sick and it cannot be cured by a return to the old nostrum-the quack medicine-price fixing. I have been urging for the past year coöperation among busi-、、 ness men for the purpose of bettering their business methods and making competition more intelligent. Some men and associations have done me the injustice to read into my words an approval of price agreements. I am unqualifiedly opposed to them whether they are accomplished by written agreement or by a "wink and nod." They are injurious, not only to the public, but to the men who enter into them. We must eliminate secret methods from our trade associations. There is no excuse for executive sessions behind closed doors.* When we gather together to consider business conditions and problems we must not have our minds on immediate profits, the strength of the industry of which we are upon but One further word may be said in this connection by way of warning. Construction of the Sherman Law by the courts has not made conspiracy or price agreements lawful, and the Department of Justice will not be slow in prosecuting violators of the law. In addition, the Federal Trade Commission has jurisdiction over price discriminations, tying contracts, and unfair methods of competition generally; and it will not be slow to act where it finds unlawful *See, in the Appendix, Letter of F. W. Lehmann to George K. Smith, April 8, 1909. Page 238. ་་ conduct. These associations or groups of business men who to-day are using a program for the bettering of business conditions as a cloak to cover up illegal practices are not merely placing themselves in danger of prosecution but, what is worse, they are impeding the real progress of their industry and seriously injuring business as a whole. Let me illustrate the danger of price agreements. There is a factory, we will say, in a city of 30,000. It has got along fairly well as regards profits during periods of prosperity, without efficient methods such as modern cost accounting and machinery. Everything was run in a loose way and most of the employes were inefficient. The fact that they worked for a firm of this k nd made it hard for them to get employment in any other plant. This particular business, we will say, joined a price-fixing combination Is there any incentive for its management to try to develop efficient methods so long as they can fix prices and take their profits out of the public? Their business will be at a standstill and depend on the power and force of the combination to bring it profits. Such inefficient management does a grave injustice to the young men who are starting in life and working for them. Its responsibility extends not only to its stockholders, but also to its employes. It has a duty to produce efficient men who will be able to obtain, if necessary, employment in an up-to-date factory. Many of those who violated the Sherman Law in the old days were indifferent to efficiency. This, in itself, is sufficient reason why they should be condemned. Necessity makes us economical in our everyday life and necessity makes us more efficient in business. It is a mistake to sneer at modern business methods and to call them red tape. They are the very foundations upon which our industrial structure must rest. Price-fixing agreements would in fact be a burden upon efficiency and a means of covering up inefficient and unintelligible business methods. What advantage would it be for, say the 10 per cent. of those engaged in an industry who are thoroughly efficient and up-to-date in their cost-accounting methods, to combine with the other 90 per cent. who are inefficient and have no adequate means for determining their costs? How can we compete in the markets of the world if our factories are not efficient? The real solution of our business ills is to be found not in price-fixing agreements, but in increasing and improving the efficiency of our factories, supplemented by an attitude of coöperation and helpfulness on the part of the government. Those business men who are efficient do not need price-fixing agreements, and it would be detrimental to the industry in question and to the public generally to allow inefficient business men to fix prices. The public and business, after all, have a common interest in the enforcement of the Sherman Law. It protects them both-the former from high prices and poor goods; the latter from inefficient methods and stagnation. CHAPTER III CONSTRUCTIVE POLICY OF THE FEDERAL TRADE Τ HE preliminary steps of administering federal laws affecting business are now thought by some to be the work, not of courts, but of a commission. Congress has vested the Federal Trade Commission* with the power to administer laws against unfair methods of competition and has provided that, while an appeal to the courts is allowed on points of law, the findings of the Commission as to the facts, if supported by testimony, shall be conclusive. Some of the trade practices which have been brought to the attention of the Federal Trade Commission are: bogus independents; fighting brands; price cutting and selling goods below cost; quantity discounts; refusal to sell goods; the use of "leaders”; systems of exclusive contracts; tying contracts; price discrimination; false and misleading advertising; defamation of goods; espionage; enticing away a competitor's employes; persuading customers to break their contracts; bringing vexatious suits in the courts; *See pages 213 to 237 for the legislation relating to the Federal Trade Commission. bribery of employes and purchasing agents of customers; full-line forcing, and others. At the outset it should be said that many methods of competition have been called to the attention of the Federal Trade Commission which should never have been brought there. If a little common sense were used in such matters, both time and money of all parties, including the government, would be saved. The Commission is anxious to protect business, whether large or small, against unfair methods of competition. Application for the issuance of a complaint, however, should not be made merely on hearsay or in order to satisfy a grudge against a competitor. A business man should pay more attention to his own business and less to picking flaws in the business of his competitor. If his entire staff of employes is enthusiastic about his company and his products and their time and effort are directed toward that end, his customers will be satisfied and his standard of business ethics will reflect credit upon him in contrast with his competitor who files unnecessary complaints and tires others with tales of woe. Business men who are continually complaining against their competitors have little time to attend to their own business and very rarely succeed. When a trade practice involving a method of competition charged to be unfair is brought in any way to the attention of the Commission, it makes a preliminary investigation to determine whether it has |