relative number of investigations in each general commodity classification. These were: Food products, 116; building materials, 58; furniture and household supplies, 35; manufacturers' supplies, 32; toilet preparations, 29; pharmaceuticals, 27; farm supplies, 26; textiles and clothing, 24; automobile accessories and parts, 22; petroleum products, 22; tobacco products, 19; dairy products, 12; stationery and office supplies, 9; recreational and sporting goods, 8; machinery, 7; beverages and sanitary supplies, 6 each; medicinal and surgical supplies, optical goods, and hardware, 5 each; coal 4, and one each of 9 miscellaneous commodities.

These investigations, covering such a variety of producing and distributing industries, have furnished the Commission with a substantial cross-section of the pricing and merchandising practices in current use, and form a valuable background for the future administration of the act.

Inquiries from the public continue.-The Commission has continued its policy of discussing with the many business men and their attorneys who call at its offices the application of the antidiscrimination statute to particular business practices. In many instances, pursuant to such conferences, there have been voluntary revisions of practices which appeared to be in probable conflict with the law. The flow of inquiries by correspondence respecting the new law and its application in specific circumstances continues to be substantial. Cost accounting investigations.-Investigations of alleged violations of the Robinson-Patman Act are more expensive and timeconsuming than those made under the other acts which the Commission administers. This is due to the technical nature of the act and the consequent particularity of detail required to determine its application, as well as to the fact that frequently elaborate cost accounting studies are necessary where justification for price differentials is claimed on the basis of cost differences.

In determining the costs of selling and distributing a commodity to each of several classes of customers, considerable difficulty may be experienced. Particularly is this true when these several classes buy through the same salesmen and receive through the same agencies of delivery two or more commodities, including the one whose prices are in question. Detailed cost and marketing records should be available. Methods of cost allocation which accord with as nearly sound accounting principles as the practicalities of the business will permit are to be discovered and followed. Such cost accounting of distribution and the analysis of markets and market conditions which it requires are in the pioneering stage. Few, even of the large and important companies, have yet worked out and installed cost-accounting systems which, for purposes of defense under the Robinson-Patman Act, are

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sound and adequate in their conception and at the same time suitable and practicable for the everyday use of the individual business

concern.

In the preliminary investigation of a charge of price discrimination in a case where the respondent bases his defense on differences in cost, the Commission's economists and accountants examine the cost data and analyses thereof furnished by the respondent in justification of his price scale, and the Commission may request further data.

Where the respondent's cost-accounting system is not adequate to disclose the necessary cost data, and cannot be readily made so, it may be necessary for him to make a sample check of his costs by a timing study of each operation involved in the sale and distribution of the commodity, the prices of which are in question, and to make a detailed record of each item of cost for a representative period and a representative part of the field of distribution. Such studies must in turn be checked by the Commission's accountants to determine their accuracy and adequacy.

After a formal complaint has been issued and proof of discrimination in price submitted in a hearing, the burden of showing justification of differences in price through savings in costs rests upon the respondent. Nevertheless, it is incumbent on the Commission's staff of economists and accountants to examine such showing upon its submission, to advise the Commission as to its meeting the requirements of the act, and to appear where necessary as witnesses in the case.

ILLEGAL STOCK ACQUISITIONS

The Commission has concurrent jurisdiction with the Department of Justice in the enforcement of Section 7 of the Clayton Act except where applicable to common carriers subject to the Interstate Commerce Act as amended; where applicable to common carriers engaged in wire or radio communication or radio transmission of energy, under the act creating the Federal Communications Commission; where applicable to air carriers and foreign air carriers subject to the Civil Aeronautics Act of 1938; and where applicable to banking associations and trust companies by reason of jurisdiction vested in the Federal Reserve Board. Section 7 declares that no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another corporation engaged also in commerce, where the effect of such acquisition may be to substantially lessen competition, restrain commerce in any section or community, or tend to create a monopoly of any line of commerce.

Section 7 also declares it to be unlawful for a corporation or a holding company to acquire capital stock or other share capital of two or more corporations engaged in commerce where the effect of such acquisition. also may be as aforementioned.

The Supreme Court of the United States (291 U. S. 587 and 272 U.S. 554) has held that the statute confers no authority upon the Commission to order divestiture of physical assets, even though obtained as a result of an illegal acquisition of stock.

Because of the inadequacy of the statute and the fact that by far the larger number of acquisitions, mergers, and consolidations are effected by purchase or merger of assets, the Commission, in previous annual reports and in reports on certain of its investigations, has recommended that the Clayton Act be so amended as to cover the acquisition of assets of competing organizations when the effect of such acquisition may be to substantially lessen competition, restrain commerce, or tend to create a monopoly of any line of commerce.

The Commission made such recommendation in the last preceding fiscal year in its report on the agricultural income inquiry. It made a similar recommendation in June 1938 in its report on the agricultural implement and machinery investigation and renews the recommendation in the current Annual Report (see pp. 19 and 29).

Details as to the Commission's cases brought under Section 7 of the Clayton Act during the fiscal year ended June 30, 1938, may be found on pp. 40, 41, and 55.

PERIODIC INDUSTRY REPORTS

In a message sent to Congress on April 29, 1938, the President recommended that some Government bureau should collect and publish current statistical and other information regarding market conditions. and be in a position to warn against the dangers of temporary overproduction and excessive inventories, as well as against the shortages and "bottle-neck conditions" which affect the welfare of business men. The Federal Trade Commission has been identified for many years with the proposal to collect and publish current industry reports. It had this matter under consideration during the first months of operation in 1915 and took certain tentative steps in that direction prior to the World War. The general aim and nature of this project is discussed at some length in the Annual Reports of the Federal Trade Commission for the years ended June 30, 1917, and June 30, 1918, and active work in this direction was undertaken in the years 1919 and 1920, under a special appropriation by Congress. It was discontinued, first, because of litigation, which ran on for several years, eventually establishing the power of the Commission to require such reports; and, second, because no further appropriation was made for the work. The Commission desires to emphasize particularly that this project was conceived as a means of improving business conditions by mitigating the severe changes of the business cycle and through such steadying of commerce and industry to aid not only all types of business organizations, but also the wage earners, and the consumers gen

erally. It was believed that such work, if successful, would benefit industry many fold the cost of such an undertaking even if it ran into a comparatively large amount.

During the year here under report, there has been a wide-spread interest in some plan of this general nature in various quarters, particularly in Washington, and the Federal Trade Commission, as on frequent occasions during the last few years, has recommended undertaking this work, especially to the Director of the Budget and to appropriation committees of Congress.

The Commission pointed out in its annual report in 1917 that trade association activity in this general direction had frequently failed, or proved ineffective, because there was no obligation on the individual member of a particular industry to make the necessary reports. The Commission also was of the opinion that the safest way to avoid the temptations of illegal cooperation, to protect the individual interests of all the members of an industry, and to have the published reports command the confidence of the general public, was to have the work done by some public authority clothed with adequate powers. The Federal Trade Commission is fully implemented with such expressly granted powers, but has not been able to use them effectively for lack of appropriations.

NATIONAL ECONOMIC COMMITTEE (MONOPOLY INVESTIGATION,

1938)

On the recommendation of the President, the Congress provided (Public Res. No. 113, 75th Cong.) for the establishment of a temporary "National Economic Committee" consisting of three members of the Senate, three members of the House of Representatives, and one representative each from the Departments of Justice, Treasury, Labor, and Commerce, and also from the Federal Trade Commission and Securities and Exchange Commission.

The work of this committee is directed especially to questions regarding the "concentration of economic power in and financial control over production and distribution of goods and services" with a view to determining the causes thereof, the effects on prices, employment, profits, and consumption, etc., and the effecting of existing Government policies in these respects. The committee is also directed to make recommendations for legislation respecting these matters.

Various other provisions of an administrative character are included, which, among other things, authorize this committee to exercise broad powers of inquiry, and appropriate funds for the services of personnel to aid in the collection and preparation of the essential information, and other necessary expenses.

Pursuant to the provisions of this resolution, the Federal Trade. Commission designated Commissioner Garland S. Ferguson, Chair

man of the Commission, as its representative on this committee, and Commissioner Ewin L. Davis was designated as the alternate representative.

The first formal meeting of this committee took place on June 21, 1938.

GENERAL INVESTIGATIONS

More than 100 general inquiries or studies have been conducted during the Commission's existence, most of them in pursuance of Congressional resolutions, although many have been conducted pursuant to Presidential orders and others on the Commission's initiative. Many of these inquiries have supplied valuable information bearing on competitive conditions and trends in interstate trade and industrial development and have shown the need for and wisdom of legislation or other corrective action. The public need for such fact-finding studies in this increasingly complex economic era grows greater, irrespective of different economic and political philosophies.

The status of each investigation in progress during or at the close of the fiscal year is described as follows:

Agricultural implement and machinery industry.-Undertaken in response to a joint Congressional resolution, this investigation was completed and the report, entitled Agricultural Implement and Machinery Industry, was transmitted to Congress as of June 6, 1938. This report showed that the bulk of production of farm implements and machines has become concentrated in a few large manufacturers. The Commission recommended amendment of the Clayton Act to make illegal the acquisition by large corporations of the stock or assets of competing corporations. (See p. 23.)

Agricultural income.-The inquiry proper was completed and the principal reports submitted to Congress in the last preceding fiscal year. On November 8, 1937, the Commission issued a supplementary report concerning legal proceedings necessary to require a few manufacturers to submit certain information requested for use in the general inquiry. The main reports, Agricultural Income Inquiry, Part I, Principal Farm Products; Part II, Fruits, Vegetables, and Grapes; and Part III, Supplementary Report, were printed and became available for distribution in October 1938. (See p. 29.)

Motor vehicles.-This inquiry, pending at the close of the fiscal year, is being conducted pursuant to a joint Congressional resolution of April 13, 1938, directing the Commission "to investigate the policies employed by manufacturers in distributing motor vehicles, accessories, and parts, and the policies of dealers in selling motor vehicles at retail, as these policies affect the public interest." The resolution also calls for information concerning the extent of concentration of control and monopoly and the extent to which any of the antitrust laws are being violated. (See p. 30.)