scale of large petroleum and steel companies.
The third way of doing business directly is that of mail order, selling to
the individual or to small dealers as in the case of the large general merchandise
mail order houses. There has lately been a development of that kind of selling
and a few large dealers and merchandisers are getting out catalogs in very fine
shape which show all the thousands of articles they have for sale. Much of this
business is done for cash and the American houses do business on such a scale
that the prices induce a large volume of sales.
The fourth way of doing business direct is that of combining with other
manufacturers. That is a subject which ought to be discussed, of course, by a
man who has studied the Webb-Pomerene Bill. It has been our experience, how-
ever, that so far as Latin America is concerned only a few Webb-Pomerene con-
solidations have been effected. Of the consolidations or cooperative sales organi-
zations with which I am acquainted, the majority are composed of firms which
are non-competitive. They will have a complete line of textiles combined with
hardware and almost any branch of merchandise, but they really don't come under
the Webb-Pomerene Bill. Nevertheless, it is an excellent plan to follow for
selling merchandise, whose volume of sale is not quite large enough to warrant
going to great individual expense.
Now, speaking mostly to those absent because all you men here are familiar
with the export business, I would say that you must get the knowledge of Latin
America which is so necessary, get it through organizations which supply it such
as the Pan" American Union, the Bureau of Foreign and Domestic Commerce,
the American Manufacturers Export Association and other bodies. You must
determine what plan you are to follow, get a conviction about how you want to
do business and then get busy.
The Bureau of Foreign and Domestic Commerce, the Latin American Divi-
sion; is always at your disposal for any assistance you may want on any specific
matters of trade.
TRADING METHODS 247
THE WEBB LAW, ITS SCOPE AND OPERATION
BY DR. WILLIAM NOTZ, EXPORT DIVISION, FEDERAL TRADE COMMISSION.
(Read at the Afternoon Session of Wednesday, June 4)
In connection with the lively interest displayed by American business men in
new situations which have developed in international trade as a result of the world
war, the so-called Webb law is receiving a noticeable share of attention.
Excluding all merely temporary, war-time legislation, it is the most im-
portant piece of legislation enacted by Congress during the war for the promotion
of American export trade. Together with the Federal Reserve Act, and the act
authorizing the War Finance Corporation to furnish credits to finance foreign
trade, the Webb law represents a noteworthy forward step in the consummation
of an American foreign trade policy. Already a literature of considerable volume
has grown up on the Webb Act, and one of our large law, schools has included a
study of this law in one of the courses of its curriculum.
Moreover, interest in the Webb law is not confined exclusively to this country.
The provisions of the Act, and its operation, have been the subject of numerous
articles in foreign publications. With one or two exceptions, the comments on the
Taw which have appeared in the foreign press have not voiced any unfavorable
criticism. On the contrary, the Act has been pointed to as a model statute.
Attention has been called particularly to the fact that the Webb Act repre-
sents the first effort involving compulsory registration of trade combinations and
a certain degree of control of the activities of such combinations by a Government
agency under a special law. A similar plan for government control of cartels and
syndicates was advocated at different times in Germany and also in Austria, in
connection with official cartel enquetes in the years 1902 to 1908. In Great Britain this
method has apparently strong support in the British Board of Trade. The Com-
mittee on Commercial and Industrial Policy After the War, in its final report
(London, 1918, pp. 62 and 63), recommended that "it should be a legislative re-
quirement that all international combinations or agreements to which British com-
panies or firms are parties, made for the regulation of the prices of goods or
services, or for the delimitation of markets, should be registered at the Board of
Trade by the British persons, firms or companies concerned, with a statement of the
names of all the parties thereto, and of the general nature and object of the com-
bination or agreements and all adhesions and withdrawals should also be notified."
As to combinations or agreements between British firms, the Committee recom-
mended that it should be optional for the parties to register at the Board of Trade,
but that any price or other marketing arrangements or agreements registered
should be enforceable at law as between the parties thereto. Lastly, the Com-
mittee recommended that the Board of Trade should have power to call upon in-
dividual consolidations or combines to furnish such information as it may require.
The newly created Canadian Trade Commission apparently favors new legis-
lation along similar lines regarding the future treatment of combines in Canada,
"which shall proceed upon the broad principle that there is an aspeqt of such
movements which requires encouragement, while other aspects require repressive
measures."
Both in this country and abroad the Webb law has attracted attention by
reason of still another fact. The laws of a number of countries approach the prob-
lem of trade combinations with the evident purpose of repressing the excrescences
of syndication. They plainly indicate a tendency to restrict the free formation as
well as the free operation of syndicates or combines. The Webb law in a way
represents a departure "from this policy. It is looked upon by many, and this was
brought out clearly in the debates and hearings on the Webb bill in Congress, as
an indication of a change in our traditional policy concerning trade combinations
and their economic utility in so far as export trade is concerned. A similar shift-
ing in governmental attitude towards combinations took place several years ago
in connection with the German potash law, followed somewhat later by similar
laws elsewhere. The whole movement has received a strong impetus during the
war, particularly in the countries economically most highly developed.
Most of the discussions of the Webb lw at meetings of trade associations
and of various commercial organizations, as well as in the press, confined them-
selves either to certain legal problems or to the numerous advantages expected to
result from use of the powers provided by that act. It is now over a year since the
248 SECOND PAN AMERICAN COMMERCIAL CONFERENCE
Webb Act was placed on the statute books of the United States, having been ap-
proved April 10, 1918. This is, of course, too short a time to permit of any final
conclusions as to the operation of the Act. Nevertheless, a survey of the general
working of the Act during the past 15 months, from a legal as well as an economic
point of view, may show in how far the expectations of those who advocated the
enactment of the present law have been realized up to the present time. In ad-
dition to this, certain trends of development can be readily observed which open
up a number of interesting new phases in the history of trade combinations, and
in a wider sense of international trade. Then, too, an analysis of the form of
organization, and of the agreements of export associations purporting to operate
under the Webb Act, will prove of interest in several ways.
Under Sec. 5 of the Webb Act every association which at the time when the
law was enacted was engaged solely in export trade, as well as every association
formed after the passage of the act shall, under penalty of fine for failure to do
so within a prescribed time, file certain statements with the Federal Trade Com-
mission. These verified written statements shall set forth the places of business,
officers, stockholders or members, and shall include in the case of a corporation a
copy of its articles of incorporation and by-laws, and if the association is unincor-
porated, a copy of its contract of association. Special forms for making this first
report are provided by the Federal Trade Commission.
Up to the present time 95 concerns, with well over 800 stockholders or
members, have filed statements with the Federal Trade Commission. It appears, 1
however, that among these associations there are a .number whose articles of asso-
ciation contemplate the transaction of business other than that of solely exporting
to foreign nations, whereas section 2 of the Act exempts from the Sherman law
such associations only which are entered into for the sole purpose of engaging in
export trade.
Twenty-eight of the associations which purport to be engaged solely in ex-
port trade under the Webb law comprise well over 300 stockholders or members.
Among the latter, however, are several trade associations, each with a large mem-
bership of their own, so that the actual underlying number of individual concerns
which appear to be entitled to the benefits of the Act easily aggregates a thousand.
The plants operated by the member concerns of these 28 associations number 318,
and are distributed over 39 States of the Union.
The diversity of industries in which these export associations have been
formed is illustrated by the following list of products which the associations pur-
pose to export to foreign nations : Bunker coal, canned fruit, carbonate of magnesia,
chemicals, clothes-pins, condensed milk, copper, doors, elastic and non-elastic web-
bing, fertilizers, flax, hardware, hides, iron and steel products, laths, locomotives
and spare parts thereof, lumber, meats, metal accessories, moldings, office equipment,
pharmaceutical blocks of carbonate of magnesia, phosphate rock, pickets, plaster,
shingles, skins, silk, soap, staves, tallow, vegetable oils, wool.
In how far have developments subsequent to the passage of the Webb law
justified the argument that cooperative selling agencies or associations among
American exporters are needed in order that the latter may meet foreign rivals
on foreign soil on equal terms? The Federal Trade Commission called attention
to foreign combinations competing with American exporters in a special report.
Therein it recommended properly safeguarded declaratory legislation, permitting
concerted action by American business men in export trade. President Wilson on
several occasions emphasized the need of making it possible and legal for our ex-
porters to combine, allowing them "to manage their export business at an ad-
vantage instead of a disadvantage as compared with foreign rivals." Likewise, the
Committee on Interstate Commerce of the U. S. Senate (64th Congress, 2d Session,
Feb. 14, 1917), in its report recommending an amended form of the Webb law
for passage, stated as its belief that "it is necessary to permit our business men to
form organizations or associations so as to enable them to meet foreign competitors
on a more equal footing."
While it is a well-known fact that export combinations existed to a limited
extent prior to the war in various foreign countries, nevertheless, it must be said
that their number and strength has been frequently exaggerated by over-enthusi-
astic writers and speakers. As a result of this the importance of foreign export
cartels and combinations as competitive factors in international trade before the war
came to be somewhat over-estimated in the minds of many, both here and abroad.
1 Federal Trade Commission, Foreign Trade Series No. 1, 1919, page 6.
TRADING METHODS 249
However, in the world-wide drive for export markets which set in during the war,
cooperation in export trade has been advocated and put into actual operation with
an ardor and on a scale which easily outdistanced all previous efforts of this kind.
The universal tendency towards consolidation, so characteristic of commerce and
industry during the war, crystallized itself to a marked extent in the form of com-
binations for the control of prices and production in domestic market and also in
export trade. Where before the war there was a limited number of export combina-
tions, chiefly in Germany, we now find them in large numbers in all the leading
countries of the world. In Great Britain their formation is being actively encour-
aged by .the British Board of Trade. The Canadian Trade Commission has
strongly recommended cooperation among Canadian manufacturers for export
trade. The Japanese Government is fostering the exports of that country by aiding
export combinations through subsidies and in other ways. Looking at competitive
conditions, then, as they exist in international trade today, the fact cannot be dis-
regarded that organized groups have replaced very largely the individual enterpriser,
and that future development seems to tend in the same direction. There is this
marked difference, however, that whereas in the absence of any government control
more or less secrecy enclouds the organization and operation of foreign export
combines, American export associations operating under the Webb Act must comply
with specific legal regulations and are subject to a certain supervision by the gov-
ernment so as to safeguard fair competition and high business standards.
Shortly after the Webb law was passed by Congress one or two instances
of unfavorable comments appeared in the foreign press, to the effect that under
the Webb Act our foreign customers might be made the victims of trust evils, such
as wilful restraint of trade and the cornering of markets.
Efforts were made at once by representative American manufacturers to set
at rest any misapprehension which might have arisen and apparently no further
unfavorable comments on the Webb law have appeared in the press abroad. As
stated above, the foreign press and leading spokesmen of foreign governments have
on several occasions given evidence of a very favorable attitude towards the
Webb law. However, in view of the above-mentioned criticism it may not be
amiss to point out certain provisions of the Webb law, as well as other considera-
tions which have a bearing on the subject.
In the first place it is to be noted that section 4 of the Webb Act makes the
prohibition against unfair methods of competition and the remedies provided for
enforcing that prohibition contained in section 5 of the Federal Trade Commis-
sion Act of Sept. 26, 1914, applicable to unfair methods of competition used in
export trade against competitors engaged in export trade. Furthermore, section
4 of the Webb law expressly gives extra territorial jurisdiction to the above-men-
tioned provision of the Federal Trade Commission Act against unfair methods of
competition. The law supplementary to the Federal Trade Commission Act, gen-
erally known as the "Clayton Law," specifies certain "unfair practices," including
certain forms of price discrimination and so-called "tying contracts."
The fact should not be lost sight of that export trade combinations have
been formed in all important commercial countries of the world, but that the laws
of the United States alone require American associations to register with a gov-
ernment agency which has wide-reaching powers under the Webb Act to check
unfair practices of competition. If certain practices on the part of export combina-
tions should grow up which would prove objectionable and would be detrimental to
"fair play" in international trade, it would become a matter for international action. 1
Looking at the Webb law from the foreign purchaser's point of view, a num-
ber of benefits accruing to them as a result of the operation of that law merit
attention. The greater diversity of goods, as well as the increased volume of
American manufactures which are likely to flow to over-sea markets in consequence
of more American manufacturers engaged solely in export trade participating in
export business would seem to involve considerable benefits to customers in foreign
lands. Export associations are in a position to pay much better attention to the
needs of a foreign market than the average individual exporter, jobber, etc. The
saving in over-head expenses, etc., possible under a joint selling arrangement,
makes possible a reduction in price. And finally, to mention but one more ad-
1 See article by W. B. Colver, on "Recent Phases of Competition in Inter-
national Trade," in the Annals of the Am. Academy of Pol. & Social Science, May,
1919, pp. 233 fol.
250 SECOND PAN AMERICAN COMMERCIAL CONFERENCE
vantage of the Webb law to foreign customers, the facilities for merchandising of
well organized and financially sound export associations will stimulate competition
in foreign markets.
It may be interesting for you to know that within the week the Federal Trade
Commission has ordered issued its first formal complaint under the Webb law.
This matter had to do with exportation of American made goods to Mexico, such
goods being labeled as though manufactured in a European country.
The law of Mexico against such misbranding will be collaterally upheld by
the enforcement of the Webb law and the Federal Trade Commission law against
unfair competition.
To sum up, it seems clear that the miotive which actuated Congress in pass-
ing this law was to promote American export trade along fair and legitimate
lines, not to seek an organized advantage. Our leading statesmen, economists,
lawyers and business men appear to be in accord that if the letter as well as the
spirit of the law is lived up to by associations which operate under it, the Act will
be found helpful not only to the business interests of the United States but in a
wider sense also to international trade. Its ultimate success or failure will rest
very largely on our own business men. If it is to serve selfish interests, as a ve-
hicle for unscrupulous exploitation of either the domestic or the foreign market, or
both, the expectations of the high-minded and broad-visioned men who were its
sponsors would be shamefully thwarted and foiled. And besides, let us not forget
that the Webb Act has teeth in it. Under the terms of that law the United States
government declares itself in unmistakable terms as insisting on fair and honorable
business methods in export trade, and it now becomes the duty of those who wish
to qualify under this law to keep the escutcheon of American honor and integrity
stainless and to uphold in the future the enviable reputation which our industrial
and commercial pioneers in export trade have established in the past.
It is particularly fortunate for the smooth administration of the law that
the Federal bodies exercising supervisory powers over it are sympathetic and
earnest in their desire that it be of real value. As reports of associations are to be
made to the Federal Trade Commission, we quote the following abstract from a
speech by Mr. John Walsh, chief counsel for the commission, at New Orleans, Janu-
ary 13 of this year :
"On account of the interest of the Federal Trade Commission in the develop-
ment and enactment of the law, it can be assumed that the Federal Trade Commis-
sion will administer the powers and authority given it by the law, in sympathetic
interest and with liberal interpretation of its provisions, but with a constant aim to
justly protect competitive conditions, both at home and abroad."
The above suggests, at least, assurance of a liberal policy in the application
of the law.
THE WEBB LAW IN ACTION
BY BENJAMIN CATCHINGS, COUNSEL TO THE EXPORT TRADE DIVISION, FEDERAL
TRADE COMMISSION.
(Read at the Afternoon Session of Wednesday, June 4)
Fellow Conferees:
June weather such as ours today no doubt hastened the signers of our
Declaration of Independence into a speedier accomplishment of their immortal
act on July 4, 1776. That thought of Independence, liberty and idea of self gov-
ernment has been spreading and bids fair to spread over all creation. If the heat
of the weather, the warmth of our fellowship and welcome, and the very important
facts laid before us are to lead us into acts which may emancipate our commerce
and give its freedom of growth and action, we must carry on without too tedious
detail.
Therefore I leave with you a printed memorandum on the "Webb Law in
Action" prepared for the Chicago convention in May. One prefers to think of
those who may desire to read it as comfortably seated before an electric fan,
smoking a good cigar, in the comforts of a private office and nothing much else
to do. While I prefer this, yet the paper, if rolled carefully, makes a good cigar
lighter, and so I le^ve it with you to be consumed or absorbed at your option.
TRADING METHODS- 251
What I tried to say in that paper was chiefly this, that every phrase and
every paragraph in the Webb Export Trade Act could be improved upon and
made more definite, more certain, but if we try to get it amended as to details
we may not recognize the law at all when it comes out of the Legislative mill.
It is a good law, and broadly speaking, its self-corrective powers should be used
to the point of exhaustion before seeking amendments. In other words, if there
is doubt as to whether Bunker coal is export coal, the Philippines a territory, or
importing a necessary incident of exporting, the provisions of paragraph 2 of
section 5 should be set in motion and a definite answer from the Federal Trade
Commission obtained.
The provision in this Act, which requires the Commission to summon an
export association before it whenever it appears to be violating the law to receive
suggestions from the Commission as to how its business should be conducted in
order to conform to the law, is unique in anti trust legislation. The Sherman
law had no such provision and business has been stumbling around for nearly 30
years in a maze of confusion as to just what acts were legal and what were illegal.
Here we have a guiding hand to make the channels and highways of foreign trade
definite and certain.
The method of using it is extremely simple. The Export Association
habitually draws up a declaration of its business methods and policy. This declara-
tion may state that the methods and acts described have been, are and will con-
tinue to be effective, unless, and until the Commission suggests a modification
thereof to conform to the law. A copy of this should be sent to the Attorney
General with notice of filing with the Commission. This declaration will precipi-
tate action. If no action results then the association could expect the courts and
any jury of laymen to turn down any collateral attack.
During the war the Allied governments pooled their buying orders and
invited bids on wood screws. The specifications were so large that only the
American Screw Co. could bid on the whole. To provide competition one inde-
pendent mill bid planning to spread the order over the other mills. The order was
refused him because his capacity was insufficient. Then the independent screw
manufacturers rushed from pillar to post to find some department of the Govern-
ment who could tell them that they could legally combine for the very purpose,
not of destroying competition, but of providing competition on these tremendous
buying orders. They found in fact why pillars, posts, stone walls and silence.
This shows the difference between an hide bound penal statue and a supervisory,
"go as far as you like," but will go with your arrangement if it works out as was
planned by the Congress.
Now I wish to get away from the technical down to the practical things that
can be done in the export trade. Heavy advertising must be done. To protect
this advertising, export manufacturers can pursue a resale price maintenance policy
on foreign sales. If they want ships they can build them or cooperate with other
export associations in providing them. There is some doubt as to whether an
Export association can both send a ship across and bring it back. This can be
met by erecting a shipping corporation to operate on a service at cost basis founded
for shipping as a university is for education. We are in an age of big things.
America is in the foreign trade and she is there to stay. If ocean freights
hinder and retard her shipments, then the combined export associations can
endow a shipping corporation with funds to write off and operate without charge
adequate ships. We can bridge the ocean on the same basis we build a public