shoe industry. Design piracy, for instance, necessarily is limited to those industries where style changes are important, so design piracy is one of the major problems in the women's-wear industry; to the best of my knowledge it hasn't yet appeared in the oyster-packing industry.

You get variations in product of the type that I have been describing as causing different focal points for problems. Similar situations arise with regard to the kind of customers to whom you sell. For instance, the pipe-organ industry which sells largely to churches has a particular credit problem which makes it a rather different industry in many respects from some other industries.

The problem of price discrimination depends largely on whether your customers are more or less the same sort of buyers or whether you have large buyers and small buyers. The problem of customer classification itself will emerge from the same sort of circumstance.

Character of the process may affect the kind of problem that the industry has. For example, the whisky industry with its problem of aging liquor has certain financial and labeling problems that are not present in a perishable-goods industry. The location of the industry will define perhaps whether it may have problems of freight classification, basing points, and similar considerations.

To give a more complete picture of the different points at which problems emerge in industries, I want to present a little experience from the N. R. A. record. The N. R. A. succeeded in writing something like 1,000 different kinds of trade practice provisions, and these were related to about 150 different trade practices. This means that the business community itself, when it came down here to write its codes, felt that at certain points its competitive problems and its problems of adjustment were particularly critical, and of those points it asked to have code provisions prepared.

Senator KING. Do you differentiate between the codes which were promulgated by the N. R. A. and the trade practices?

Dr. THORP. I am now talking about the trade-practice provisions which were written in the N. R. A. codes on the assumption that those trade-practice provisions are a reflection of the problems which each industry felt needed to be dealt with in its code of fair competition. Senator KING. As I recollect, you had between 500 and 650 codes, and I was wondering whether the trade practices were supplementary to or part of the codes, or incorporated in the codes.

Dr. THORP. They were incorporated within the codes. I think this is one of our best sources for indicating the various kinds of problems and I would like very briefly to present a list of types of trade practice provisions in the codes. There were certain provisions relating to production and capacity control; some concerned with minimum prices; others having to do with indirect price concessions. Now that is very important, because in many industries the problem of selling and of price determination, is a focal problem, and was concerned with the time of buyer's payments, guarantees, allowances, options and similar buyer's privileges; restriction on the supply of additional goods; restrictions on services to buyers; restrictions on financial assistance to buyers; restrictions on shipment concessions; restrictions on commission concessions; restrictions on payments for buyers' services; restrictions on accepting competitors' materials from buyers; restrictions on the sale of sub-standard or obsolete goods; restrictions on concessions beyond agreement; restrictions on forms of payment concealing concessions; restrictions on selling agreements, invoices, and so forth, concealing concessions; mandatory forms of agreement for prevention of concealed concessions; restrictions on granting of concessions to suppliers; and restrictions on the acceptance of concessions.

Now all these represented cases in which industries came to Washington and expressed the need to deal with a certain specific situation which was the strategic point at which they felt that competition needed support or correction.

Senator KING. Well, after all, did not those trade practices, and the codes, make for monopoly rather than competition? Did they not crystallize at an unjust and too high level the prices which they were charging the consumers? Wasn't that the purpose? I wouldn't have gone into this, except for my interpretation of your remarks.

Dr. THORP. I hope you will just interpret my remarks as indicating the points at which industry felt that its problem existed, the sort of situation in which it wanted assistance from the Government, and my intention in putting this in is to show the variety rather than intent.

Senator KING. It wanted to be freed from antitrust prosecution, or the charge that they had violated the letter and spirit of the Federal Trade Commission Act.

Dr. THORP. On nearly all of these points, any agreement on the part of the industry to deal with it would be a violation of the antitrust laws had there not been the exemption provided by the N. R. A. Mr. ARNOLD. May I just, for the sake of the record add a word, that according to the antitrust laws as I see them, had the agreement been consistent with efficient or orderly marketing, it might conceivably have been held reasonable. In other words, I wouldn't like the record to show that these agreements would necessarily be in violation. I don't think you mean they would.

Dr. THORP. No; I think that is a very correct addition. Then there was a series of provisions designed to preserve or modify channels of distribution, another to preserve or modify geographical relationship

Representative SUMNERS (interposing). What does "modify geographical relationships" mean to somebody doing business? What would that be?

Dr. THORP. That has to do with cases in which there may be price structures in which certain regions are established.

Representative SUMNERS. You mean somebody is going to trade in one region, and somebody else in another region?

Dr. THORP. One case of this type would be to require that people selling beyond the Rocky Mountains shall have a certain relationship in their price structure to the price at which they sell in the East. There are a number of different ways in which the codes were used in the hope of improving the position of this or that geographical group. Representative SUMNERS. We can ask some questions later about that, can't we?

Dr. THORP. Yes, surely. Standardization, simplification, and labeling; limiting coercive and predatory devices; limiting deception and misrepresentation; regulating bidding and awarding practices.

Mr. Chairman, I might submit this list rather than taking your time reading it, and it could go in the record.

The CHAIRMAN. That will be quite acceptable and it is so ordered. (The list referred to "Analysis of Trade Practice Provisions in N. R. A. Codes" was marked "Exhibit No. 73" and is included in the appendix on p. 236.)

NRA CODES ILLUSTRATE DIFFERENCES IN PROBLEMS

Dr. THORP. To make certain this point is clear, I would like to take the first 10 codes and in 2 minutes' time, if I can do it, indicate the different points at which these industries seem to feel that their problem appears.

Senator KING. May I inquire, you are not presenting this, are you, and I am not criticizing you if you are, for the purpose of urging or recommending or having this committee approve of or recommend the restoration of the codes, or something similar to them, in order to avoid the antitrust laws or the Federal Trade Commission Act?

Dr. THORP. Senator, I am introducing this just as the best evidence that I know in brief space to show how different the industries are, how different their problems may be.

The CHAIRMAN. And this is merely a list of the problems as developed by industry itself, and not by you.

Dr. THORP. That is correct. This is an analysis from the codes. I take the first 10 for this reason. After that patterns began to develop and industries began to follow other industries.

The CHAIRMAN. In other words, you are not trying to develop any state of opinion with respect to the desirability of any particular procedure toward these problems; you are merely analyzing the problems.

Dr. THORP. That is correct. I think this indicates what industry thought was the problem, at any rate.

In the first code, the cotton textile code, the heart of the code so far as trade practices was concerned was restricting machinery operation to two shifts. The cotton textile industry evidently felt that its problem was essentially centered around the use of the third shift.

The shipbuilding and repairs industry chose to outlaw sales below reasonable cost, rebates, discounts, service, and other things which might nullify the effort. In other words, its code centered around the price problem.

The wool textile code also had the shift problem.

Representative SUMNERS. How would you get at whether somebody was selling below a reasonable price?

Dr. THORP. That always was one of the problems. I think it would be appropriate to ask Mr. Henderson that.

Representative SUMNERS. I will ask Mr. Henderson that.

Dr. THORP. The electrical manufacturing industry code had a much more elaborate problem of control over the merchandising activities of its members, proscribing sales below cost, detailing the accounting methods to be used, fashioning an elaborate price filing system.

The coat and suit industry manifested an intense concern over high-pressure production methods, and used niachine-hour limitations, though later they came in for additional limitations on style piracy. The lace industry left the problem of fair-trade practices for later consideration.

The seventh code, however, the corset and brassiere code, foreshadowed N. R. A.'s eventual large-scale development of trade practice regulation, because it went in for selling below cost, advertising allowances, supplying advertising programs, free demonstrations, delivery charges, returned merchandise, credit on worn garments, discounts and terms, rebates, extra datings, P. M.'s-P. M.'s are cases

124491-39-pt. 1-10

in which the manufacturer gives bonuses to sales people who sell his products, sales people in the retail store-merchandise exchange and consignment, standard containers, standard cost systems. All this just had to do with Division A of the industry, those selling to resellers, and they had an entirely separate and quite as long a list of rules for those manufacturing for stock.

Then the legitimate, full-length dramatic and theatrical industry was apparently not even aware of the trade practices of its predecessors, because it was concerned with problems such as booking agreements, offices, contracts, ticket scalpers, and standard forms of contracting. The lumber and timber products industry, which struggled not only in its initial code but for 2 years to deal with is problems under N. R. A. went in for allocation of production quotas, the establishment of minimum prices and a whole series of supporting provisions with regard to prices.

Finally came the petroleum industry, whose code had an even more comprehensive program of distribution and sales control.

There you have the first 10 industries which came into the N. R. A. with such different problems and with concern about such different aspects of the total activity that I think it does demonstrate the fact that we have to think about these industries in considerable measure in terms of their variety rather than in terms of their similarity.

MEASURES OF CONCENTRATION

Dr. THORP. Now I come to the question of concentration in industries. That is different from the problem of size. It is essentially a problem in terms of individual products. One can have a large enterprise which may not be important in any industry or in any product if its activities are scattered widely. On the other hand a very small enterprise may be the dominant one for some individual product, so that it is important. As one thinks about the problem of concentration, and by that I mean influence or control over the production and marketing of the particular product, it is important to realize that that is not identical with size.

Of course, it is true that in many of our large industries you can't have concentration unless you have size. But I do want to emphasize the point that it is perfectly possible and probably true in many cases that we have small enterprises whose position in their own market is stronger than that of many of the larger enterprises in their market. Obviously we have a group of cases in the patents field where, by definition and with Government aid, you have complete dominance of a particular product by the holder of the patent, if it happens not to have been licensed so that others can produce it. In that case your single enterprise is the sole producer as a result of its patent right.

We have by no means completed our study of this problem of the degree of concentration. For the purpose of indicating something about the kind of problem it is, I have gathered together from various Government sources the measurements for a number of particular products. Again let me emphasize the fact of the importance of measuring this by products.

The figures which I am going to read will give the product, the number of companies which produce a given percentage of the output, and then the year and the Government authority. These are arranged alphabetically.