The second type of reporting plan is that used in businesses in which goods are sold to jobbers and retailers and in which transactions are closed currently for quantities of goods which may be more or less closely graded and standardized. Great differences exist between associations with respect to the amount of detail and the frequency of reports by members to the central office. In the most extreme form, all particulars as to the day's business would be forwarded daily to the central office by each member. The recently adopted plan of the Hardwood Manufacturers Association approaches this very closely. A sales report must be made

48

48 In the plan of the Hardwood Manufacturers Association, which went into operation March 1, 1917, six different reports are to be made by the members: production reports, sales reports, shipping reports, stock reports, price-lists and inspection reports. The production reports are monthly reports made by each member of the grades and thicknesses, classified according to a scheme adopted at the time the open price plan was put into operation. These reports are summarized by the secretary and mailed to the members within fifteen days of the close of each calendar month. Shipping reports are to be made daily with the sales reports and include copies of invoices, special agreements as to terms, grade, etc. Each member reports monthly through the secretary the amount of stock of each grade, kind, and thickness on hand the first of the month. Totals are reported by the secretary to the members. Price-lists are to be filed by each member at the beginning of each month at the same time as the filing of the stock reports. Prices are to be made f. o. b. shipping point. Every change in price must be filed with the association currently as soon as made. It is not compulsory for any member to follow the price-list or the

daily by each member to show all sales and cancellations made that day whether any business has been transacted or not. They are to be exact copies of orders taken and to include all sales, large or small, to include all special agreements of every kind with reference to price, grade, or terms, whether the agreement is written or verbal. The secretary's report to members upon sales, which is weekly, divides customers into two classes. Class A includes all wholesalers, retail yards, and all others who resell except exporters, and may include others by consent of members; the names of these sellers and of customers and prices are shown. Class B includes all consumers who do not resell the stock as lumber, and also exporters; but in reporting these sales, name of customer and place shipped are not to be shown on the secretary's reports.

The reluctance of members to furnish competitors with detailed information, the lack of adequate financial support, and the amount of labor involved in handling reports are responsible for the fact that most so-called open price associations do not carry out the open price plan fully. The divergence from complete open price methods may be small and unimportant or may be so great as to give rise to the question as to whether a particular organization should be classed among open price associations or not. In the reporting scheme of the Leather Belting Exchange which furnishes an example of the former, copies of all invoices are sent by members to the central office; but only those above sixty dollars are listed in the secretary's report to members. It is said that thereby ninety per cent of the invoices are eliminated and the resulting reports are not materially affected as indicia of market conditions. changes which he reports to the association. Upon the basis of these pricelists the secretary reports to the members within the first ten days of each month a summary of prices asked by members, and any changes are reported currently to all members by the secretary. Inspection reports are special reports established for the purpose of checking up grades of lumber which have been fixed by the committee as a basis for operating under the open price plan. The purpose is to furnish each member a basis upon which he can compare his prices with other members, thereby making the price reports more intelligible and accurate.

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49 W. V. Spaulding, Experiences in Coöperative Competition, pp. 6, 7. The National Association of Brass Manufacturers has a somewhat similar plan. Copies of all invoices are sent daily by members to the commissioner. The report of the latter upon the basis of information received gives the size, quantity, and kind of goods sold, the city in which the sales were made, and the prices at which the goods were sold. Customers' names do not appear while sellers' names are given in cipher, a key to which is furnished to members.

These give a transcript of data including length, width, thickness, weight discounts, and price of belting sold, but the buyer's name does not appear and the seller's name is designated by a code number known to the secretary only. If any member wishes more specific information concerning a transaction, he may secure it by application to the secretary who, without revealing names, corresponds with the seller. To give another instance, all members affiliated with the Information Bureau of the Western Pine Manufacturers' Association send in each day an exact copy of orders taken. In the office of the secretary these are compiled into a daily report which contains all the information regarding orders except the name of the customer and the town in which he is located.50

Other associations illustrate more pronounced variations from the details of the plan of organization as outlined by Mr. Eddy. Members of the Optical Manufacturers Association, having initially filed lists of prices, notify the secretary immediately of any change, and also submit weekly reports as to the amount of business transacted, from which the secretary's monthly summaries of business are compiled. The Ohio Millers State Association requires only a weekly report of selling prices of flour and mill products, buying prices of wheat, and information as to stocks of wheat and flour, all of which is combined with comments among general conditions and reported to members. The monthly reports of the Asbestos Textile Manufacturers' Association give detailed statistics as to the amounts of sales, stocks, orders filled, orders unfilled, high, low and average prices both for orders and sales. Individual transactions are not reported.

The Associated Metal Lath Manufacturers furnishes an interesting as well as a highly unusual example of an association which has attempted to carry the open price methods into the reselling of its products by jobbers and representatives. Members notify the central office of any changes in prices from lists previously filed as applying to distributors; such changes are immediately reported to other members. In order to secure current reports upon the fluctuating prices in the larger cities between jobber, dealer, and consumer, local associations have been organized in important centers, which comprise branch houses, repre

50 That is, the state in which the sales are made, rate of freight from shipping point, name of selling firm, and each item with the amount and delivered price as well as the price f. o. b. mill.

sentatives and jobbers directly representing the manufacturer. These local organizations exchange information through their local directors office-all prices which they quote as well as a weekly sales report which gives all details of sales except the buyer's name. The local reports are dispatched to the office of the Associated Metal Lath Manufacturers and forwarded promptly to each member.51

Legal Status of Open Price Associations

The legal status of open price associations operating along lines proposed by Mr. Eddy has as yet not been definitely determined by pronouncement of the courts or legislative enactment. Proponents of the plan declare that open price methods are in full conformity with both federal and state laws. It is said that a number of associations have submitted their constitutions and by-laws to the Department of Justice and to the Federal Trade Commission; some have gone so far as to file minutes of meetings with the latter body. In every case, however, the attitude of officials has been strictly non-committal neither affirming nor denying the legality of open price organization. Opinions as to the status must therefore be derived from a composite study of the legality of the essential features and operation of open price associations. The only case in which a good example of such organization has been brought before the courts was incidentally in the suit to dissolve the Steel Corporation when testimony was taken upon the Bridge Builders' and Structural Society. In the final opinion nothing was said specifically concerning that association but in speaking of the "Gary dinners" certain statements were made which seem to have a direct bearing upon open price methods.

The legal propriety of associations of competitors for certain purposes is unquestioned. Trade associations being nothing more than individuals, firms, or corporations engaged in a particular line of trade and acting under some kind of a formal organization are not obnoxious to law. 52 The purposes for which associations may legitimately be formed are numerous, including social intercourse, protection against insolvent debtors, publication of statis51 Cf. program New England Builders' Supply Association, Feb. 20, 1917, p. 43.

52 Trust Laws and Unfair Competition, Report of the Commissioner of Corporations, dated March 15, 1915, p. 714.

tical data, etc. The exchange of information as to actual sales and prices received or quoted appears to be a legal purpose for an association provided such statistics truthfully represent current prices based upon actual sales or offers to sell or buy. But as has been stated in one case, if prices are misrepresented with a view to boosting the prices of any items, such action will be condemned by the courts. 58

There seems to be no legal objection to coöperation of competing concerns in the introduction of a uniform cost accounting system. The Federal Trade Commission recommends the extension of cost accounting and is willing to lend its aid in devising a suitable uniform system. But the adoption of uniform cost accounting and the exchange of information with regard to costs may be used as a means of fixing prices by indirection, perhaps in accordance with the highest costs as was the case with some of the farm machinery trade associations.54 This is an abuse of the discussion of costs and not a fundamental objection to the open price plan.

Meetings of competing firms to discuss business conditions including prices are not illegal provided the result does not amount to an agreement to fix prices. The government, in the original petition to dissolve the steel combination, concedes this by stating,

53 The efforts of the Yellow Pine Manufacturers' Association to raise the price of lumber were declared unlawful. Although the association disclaimed any effort to raise prices, in the system of published current prices compiled by the secretary from reports of members, only the higher prices were given. The result was that prices constantly advanced and that "while a rigid adherence to the price fixed was in the nature of things well nigh impossible, yet the prices charged revolved about the prices fixed like planets in their orbits revolve about the sun." A writ of ouster was suspended upon the condition among others that the respondents would in the future sell lumber in free and open competition, and that they would not be a party to the publication of any price current except such as gave honest information with respect to actual and bona fide sales of such products and the prices paid therefore. It is to be noticed also that this decision sanctions the collection and dissemination of such information as is desired for the operation of the open price plan. Cf. Trust Laws and Unfair Competition, pp. 719, 720. State v. Arkansas Lumber Co. et al., 169 S. W. 145, 176, 177, 179.

54 Farm Machinery Trade Associations, Report of the Bureau of Corporations, dated March 15, 1915. The National Association of Wagon Manufacturers, the National Plow Association, and the National Implement and Vehicle Association were all very active in furthering the adoption of a uniform cost accounting system but their methods differ from those of well directed open price associations in that they discussed and recommended future prices. Report, pp. 23 et seq., 45, 46 et seq. Cf. also the discussion of the significance of the cost system in relation to selling prices, pp. 54-55,