other concerns. The principle of fair trade is often invoked to These various protective measures commonly employed in business to safeguard the particular enterprise, are discussed in this and the succeeding chapters of Part IV. There are, of course, numberless other ways in which business interests are guarded against destructive assaults-the greatest and most inclusive of which is able and aggressive management. Some of these methods are referred to later in the present chapter, but they are too many and too varied to be given detailed consideration. Purpose of Protective Measures All of the protective measures employed in business have one end, the creation so far as may be of a monopoly. If a patent is taken out, its one purpose is to secure to the patentee the exclusive right to the manufacture, use, and sale of the mechanism patented. A trade-mark registry is useful in preventing others from using that particular device and thereby handicaps competition. A process is kept secret in order that its owners alone may manufacture and sell the particular product. In some cases a complete monopoly is established, and in all cases the success of the protective efforts is gauged by the greater or less "exclusiveness" secured. The more nearly a monopoly is approximated, the smoother the commercial pathway of the enterprise, and, governed by the possibilities of the particular line of business, the greater its rewards. Selection of Protective Methods In most cases the proper method of protecting a particular business interest is clearly indicated by the conditions. If the patent, the trade-mark, or the copyright applies, that particular method will be used as a matter of course. It is sometimes possible with much advantage to utilize several of the usual protective methods for the safeguarding of a single product. For instance, a new chocolate preparation, if the nature of the process permits of separation, might be partially patented and in part held as a secret process. Still further to guard the product, it might be sold under the protection of a registered trade-mark and in a package distinctive in form and color; and finally its sale would naturally be conducted under the tradename of the concern by which it is manufactured or distributed. Such protective measures, if properly used, should effectually bar any competitor from selling that preparation under any trade-mark and from selling any other preparation under that trade-mark, and generally from availing himself in any way of the product or its distinguishing marks to the injury of the rightful owner. Where the nature of the enterprise will not permit of such methods of business protection, or where they are not sufficiently protective, other means must be found or devised that will preserve the undertaking from too destructive competition and at least enable it to maintain its own. This must be done in many lines of business—and especially retail business-where the availability of the more formal protective measures is greatly restricted or entirely wanting. In such cases, the integrity of the business must be preserved by a careful observance of the laws of supply and demand, by judgment in the selection of a location, discretion as to the character, quality, and quantity of stock, fair treatment of employees, able salesmanship combined with honest and courteous handling of customers, and general business intelligence and ability. Even in such cases, certain lines or articles may perhaps be protected by patents or trade-marks, or be held as secret processes, and the trade-name itself, i.e., the name under which the concern does business, occasionally becomes, if not the equivalent of a monopoly, at least a protective feature of great value. Special Methods of Protection Beyond the incidental protection suggested, the field is an open one in many lines of business, and, barring initial inequalities as to capital and natural abilities, the fight is a fair one with no favors. In such case special efforts must be made to gain and hold trade. Thus a retailer may advertise so extensively and persistently that his less noisy and less aggressive competitors are lost in the turmoil. They are still there but so completely overshadowed that the blatant advertiser gains many of the advantages of exclusive sales rights in that location. Or a manufacturer may so improve his machinery or processes, or so better his facilities, or otherwise manage so well that he routs his competitors by supplying more or better goods for the same money, or the same goods for less money. Efficiency as a Building and Protective Measure It is to the ability to supply more or better goods for the same money that the chain store owes its remarkable growth. Such a store is usually started with ample capital and its purchases are made in large quantities and for cash, enabling it to buy its goods at from 10 to 15 per cent less than the same goods cost its competitors. It also sells for cash, so that any loss from bad debts, together with the cost of keeping accounts, is eliminated. It can therefore do business on a smaller margin of profit than the ordinary credit-asking and credit-giving retail store. Add to this its tried and effective system of store organization under which each unit in the chain is in charge of a capable manager, trained in his duties, held to strictest accountability and, for the most part, sharing in the profits, and it is not difficult to account for the great success of such stores. So successful is this partial form of monopoly that there are today-it is said-no less than five thousand different "chains" in this country and seventy-five thousand individual stores. Taking Advantage of Opportunity In the case of the chain store success has been won by actual bettering of the routine operations of business. Occasionally some commercial genius discovers an industrial line of low resistance, some opportunity for exceptional profits, something which has been neglected or overlooked, or opened up by changing conditions. Instead of blazoning forth his discovery to the world and to his competitors, he carries on a "still hunt"-reaching his market or consumers in the most unobtrusive way he can devise, and enjoying, perhaps for years, his semimonopoly because those who would otherwise be his competitors have no idea that he has any business worth competing for, or which they could undertake with profit to themselves. An instance where changing conditions opened an opportunity was afforded some years since by an abandoned zinc mine in the Ronduit Valley. This mine was worked many years ago with fair profit. In the course of its operation a large dump of "tailings" accumulated which contained a considerable percentage of zinc, as the processes used had only partially recovered the metal. With falling prices, the mine gradually became unprofitable, the owners quarreled among themselves, and it was closed. For many years it remained unworked and entirely neglected. Then came the Great War with its insistent demand and high prices for metals of every kind. One of the resident owners of the mine investigated the modern processes of zinc extraction and found that the old dump could be worked over at a substantial profit. He was not apparently one of the upright and high-minded men "seeking prosperity through service, rather than through selfishness," for, without even consulting the other owners of the mine, he quietly installed the necessary machinery, and worked over the larger part of the dump, meanwhile pocketing very handsome profits. About this time the other owners woke to the fact that there was something going on. The result was litigation which summarily stopped further operations and relegated the mine to its former condition of innocuous desuetude. The ethics of the first owner's operations are open to question, but the profits are not. CHAPTER XV MONOPOLIES Creation of a Monopoly A commercial monopoly is created by a more or less complete control of a market, and this market control may be secured by control of the product-or whatever the subject matter of the monopoly may be or by means of some material advantage over competitors. The Kimberley Diamond Fields An excellent example of a monopoly secured by control of output is found in the Kimberley diamond fields of South Africa. The great bulk of the diamond supply of the world comes from these fields. Formerly the mines were in the hands of a number of small owners, operating independently and as each man saw best, without regard to the law of supply and demand, or any other economic principles. Their only anxiety was to secure and realize upon the largest possible output of diamonds in the shortest possible time. This very natural proceeding entirely overlooked the opportunity for combination existing in the Kimberley fields. Instead of the peace of mind, large profits, and other comfortable features of a monopoly, there was the most active competition and overproduction, until the diamond market was glutted, prices fell disastrously, and the whole business was thrown into a state of demoralization. The enormously important fact that the greater part of the world's supply of diamonds came from these few acres of blue clay had not been perceived as yet by anyone capable of ending the disastrous competition by a consolidation of the warring interests. |