UNIVERSITY OF CALIFORNIA
AT LOS ANGELES
a>nVERSITY of CALrPORNDI
THE FEDERAL TRADE COMMISSION
June 30, 1919
GOVERNMENT PRINTING OFFICE
^ 6 ?< S 1 fl
THE FEDERAL TRADE COMMISSION
June 30, 1919
GOVERNMENT PRINTING OFFICE
FEDERAL TRADE COIVIMISSION.
William B. Col\^b, Chairman.
John Fbanklin Fokt.
J. P. YoDEB, Seci'etary.
In tlie preparation of this report special acknowledgment is made
by the Commission to Mr. George A, Stephens, and also to Messrs.
Arthur B. Adams, Vanderveer Custis, J. Shirley Eaton, William
F. Notz, and Edwin C. Eeed.
5 IP 1
Letter of transmittal 11
Chaptkk I. â Urgency of the Food Pkoblkm and its Proposed Solution.
Sec. 1. â Food prices and incomes l.">
Sec. 2. â Effect of food prices on trade lo
Sec. 3. â Analysis of food prices â Distribution as a factor 14
Sec. 4. â Uneconomical wholesaling of foods IG
Marketing facilities 10
Marketing processes 17
Sec. 5. â Proposed public wholesale market IS
Public as applied to market defined IS
Federal control of markets to be preferred over State or
The Railroad Adnfinistration as the controlling agency 21
Sec. 6. â Indirect benefits possible from the public-marketing system 21
Food storage and preserving 21
Unified delivery system 22
Licensing of shippers and Government inspection 2.3
Market information , 24
Chapter II. â Present Organization of the AVholesale Marketing
the marketing of food.
Sec. 1. â The nature of marketing 25
Sec. 2. â The marketing of food as a separate branch of trade 26
Sec. 3. â Subdivisions in the food trade 27
Sec. 4. â The wholesale and the retail trade 30
dealers and their functions.
Sec. 0. â Dealers in general 32
Sec. G. â Dealers and the forms of dealing 33
Manufacturer's representatives, branch houses, etc 33
Commission houses 35
Whole.sale merchants 3G
Sec. 7. â Dealers and their position in the nfarkels 37
Country collectors 37
Sec. S.â Market tendencies and types of dealing 39
TRANSPORTATION AND MARKETING.
Sec. 9. â The significance of transportation 42
Sec. 10. â Geograpliical specialization in food manufactui'e 4:;
Sec. 11. â Tlie growing districts and distant marlcets â 44
Sfc. 12. â Some reasons for tlie separation of growing districts and
TYPES OF MARKETS.
Sec. 13. â Classification of markets 51
Sec. 14. â Shipping markets ")!
Sec. 15. â Receiving markets M
Ser. IG. â Auction markets _ 56
Sec. 17. â Farmers' markets 59
MARKET FACILITIES AND EQUIPMENT.
See. 18. â Market facilities and market conditions 61
Sec. 19. â Stores 61
Sec. 20. â Terminals 64
Sec. 21.â Storage 67
Sec. 22.^ â Cartage 73
Chapter III. â Conditions in the Wholesale Marketing of Produce
Which Make for Losses.
losses at producing and shipping points.
Sec. 1. â Losses on the farm and in the orchard 76
Farm treatment of eggs 77
Sec. 2. â Losses due to poor packing of goods 78
Failure to sort and grade produce 81
Lack of uniform standard packages 84
Advantages of standard grades and packages S5
Sec. 3. â Lack of facilities at shipping points 86
LOSSES during TRANSPORTATION.
Sec. 4. â Shortage of properly equipped cars 87
Sec. 5. â Improper loading of produce '.)()
Improper loading on vessels 01
Sec. 6. â Losses from irregularity and delay in transit 92
Delay and damage in switching 97
Irregularity and delay of expi'ess deliveries 100
Sec. 7. â Damage from heat, cold, and lack of ventilation 101
Sec. 8. â Losses from rough and negligent handling 106
The breakage and wetting of eggs lOS
The pilfering of foodstuffs 112
Sec. 9. â Difficulty in collection of railroad claims 113
LOSSES AT terminals AND MARKETS.
Spr. 10. â Multiplicity of terminal freight yards 114
Sec. 11. â Lack of facilities at freight terminals 118
Track and platform facilities lis
Warehouse facilities at terminals 121
Terminal facilities for vessels 123
Ser. 12. â Expense and loss In cartage 12^
Sec. 13. â Lack of adequate warehouses i:!l
Inadequate amount of storage VA3
Inefficient, insanitary, and poorly located storage 134
Excessive charges and discriminations l.'JO
Storage facilities in certain cities 13S
Sec. 14. â Defects of the wholesale market districts 14:!
Cougestion of marlcet districts 14"
Inadequate and insanitary buildings 14"
Excessive rentals for stores 147
Sidewalk, street, and truck as salesroom 14S
Scattered wholesale markets 149
Sec. 15.â The effect of glutted markets 1.11
Gluts and famines irÂ»t
Dumping of produce 152
Gluts and retail price 154
Unregulated shipping and buying 155
The effects of facilities and outlets 15S
Sec. 16. â Wholesalers' excessive expense for delivery 159
UNFAIR AND WASTEFUL TRADE PRACTICES.
Sec. 17. â Practices of farmers and shippers 163
Sec. 18. â Practices of commission men and brokers 165
Sec. 19. â Practices of wholesale dealers 172
Sec. 20. â Practices of retail dealers 175
Sec. 21. â Practices at fruit auctions 178
Sec. 22. â Speculative and monopolistic dealers 180
Chapteb IV. â Methods or Handling Wholesale Food Problem.
Sec. 1. â Needed improvements in business 1S5
Sec. 2. â Different methods of dealing with problem 185
Initiative of dealers 185
No immediate results through cooperative associations 186
State and municipal activities inadequate 187
Federal action adequate 187
Sec. 3. â Description of proposed marketing facilities 188
Centralized food tei'mlnals 188
Storage â manufacturing â marketing facilities ISO
Sec. 4. â Establishment of facilities through Federal Government 101
Through its own agency 1!Â»2
Through the railroads 103
Through State and municipal governments i;)4
Sec. 5. â Regulation of marketing methods through Federal license 104
LIST OF TABLES.
Table 1. â Number of States interested in the markets of 16 cities for
specified commodities 48
Table 2. â Volume of business, expenses and profits of 7 wholesale dealers
in fruits and vegetables, Leipzig, 1910 256
LIST OF CHARTS.
Following page â
Chart I. â Googrnphical concentration in the production of certain manu-
factured food products. 1914 44
Chart II. â Strawberry shipping seasons 47
LIST OF MAPS.
Following page â
M;ip I. â White potatoes, 1917 â Car-lot shipments unloaded at New
York, Cliicago, and Minneapolis 46
Slap II. â Peaches, 1917 â Car-lot shipments unloaded at New York, Chi-
cago, and Minneapolis 40
Map III. â Strawberries, 1917 â Car-lot shipments unloaded at New York,
Chicago, and Minneapolis 4li
Map IV.â South Water Street Market, Chicago 242
Exhibit I. â Survey of New York Produce Marketing Conditions.
SUMMARY AND CONCLUSIONS.
Sec. 1.^ â Present marketing conditions .. 197
Sec. 2. â Immediate corrective measures 198
Sec. 3. â Permanent revision 198
PHYSICAL MARKET â COMMODITIES AND FACILITIES.
Sec. 4. â New York metropolitan district an entity 201
Sec. 5.â Territory tributary to New York market 201
Sec. 6. â Volume of perishables marketed, and distribution through the
Sec. 7. â Seasonal zones of supply 202
Sec. 8. â The market places 204
Sec. 9. â The primary market : Carriers as market masters 205
See. 10. â Commission merchants and jobbers 207
Sec. 11. â Localized commodities 208
Sec. 12. â Other distributing agencies _ 210
Sec. 13.â Storage 210
Sec. 14. â Handling: Principle bad, methods awkward 210
Sec. 15. â Terminals: Transportation problems 211
Sec. 16. â Delivery problems of carriers 212
Sec. 17.â Trucking 213
COMMERCIAL AND SOCIAL ASPECTS OF THE MARKET.
A. HANDLING PRODUCE COM .MERCIAI.LY.
Sec. 18. â Essentials of the commercial market; regularity in time and
Sec. 19. â Irregularities affect prices 216
Sec. 20. â Location of merchants in the market 216
Sec. 21. â Food distribution : Requirements of retail trade 21G
Sec. 22. â Complex market machinery 218
Sec. 23. â Commissions and brokerage 219
Sec. 24. â Number and personnel of dealers 220
Sec. 25. â Trade agreements 220
Sec. 26. â Distributor.s' organizations 220
Sec. 27. â Shippers' organizations and sales agencies 220
Sec. 28.â Parlies to market 220
Sec. 29. â Tran.^actions 221
Sec. 30. â Apporlionnicnt and control of business by individual lirnis 222
Sec. 31. â Contiol of crop 222
Sec. 32. â Trade practices : Ethical aspects 22.3
Sec. 33. â Expense of tlistribution 224
Sec. 34.â Control of flow to market 225
B. MARKET FLNCTIONS.
Sec. 35. â Price making 226
Sec. 86. â Publicity â reporting 227
Sec. 37. â Grading and sampling: By the trade, by official agency 228
C. SOCIAL DIRECTION OF THE MARKET.
Sec. 38.â Market regulation 229
Sec. 39. â How regulation becomes a social function 232
Sec. 40.â Remedy lies in extension of market idea 233
Sec. 41. â Public consciousness of need for revision : Interstate outlook 233
Sec. 42.â Solutions offered 233
Exhibit II. â Brief Survey of Several Kepresent.^tive Markets.
Sec. 1. â Boston produce marketing facilities 235
Sec. 2. â Pittsburgh produce marketing facilities 238
Sec. 3. â Chicago wholesale marketing facilities for produce 240
Sec. 4. â St. Louis wholesale food marketing facilities 242
Sec. 5. â Memphis wholesale food marketing facilities 244
Sec. 6. â Charleston produce marketing facilities 245
Sec. 7. â Wholesale food marketing facilities at New Orleans 246
Sec. 8. â The Los Angeles wholesale terminal market 248
Exhibit III. â The Wholesale ^Lvrketixg of Perishable Foods in
Sec. 1.- General features 250
Sec. 2. â Wholesale marketing in France 251
Sec. 3. â Wholesale marketing in Great Britain 253
Sec. 4. â Wholesale marketing in Germany 254
Sec. 5. â Danish cooperative export associations 256
Sec. 6. â Import and export trade in perishable foods 257
Sec. 7. â Wholesale marketing of fish 259
Sec. 8. â Wholesale marketing of meat 261
Sec. 9. â Government regulation during the war 266
LETTER OF TRANSMITTAL.
Federal Trade Commission,
Office of the Chairman",
Washington, Jvme 30, 1919.
Sir : I have the honor to submit herewith the Report of the Federal
Trade Commission on the Wholesale Marketing of Food.
This report presents a part of the information secured in the course
of the general food investigation, which was begun in accordance
with the instructions given in your letter of February 7, 1917.
By direction of the Commission.
Yours very truly,
William B. Colver,
The President, White House.
REPORT OF THE FEDERAL TRADE COMMISSION
ON THE WHOLESALE MARKETING OF FOOD.
URGENCY OF THE FOOD PROBLEM AND ITS PROPOSED
Section 1. â Food prices and incomes.
Food prices have risen in recent years with incredible swiftness.
The weighted average of wholesale food prices in the United States
was in December, 1918, 107 per cent higher than the weighted aver-
age for the year 1913.^ It is, however, not so much the rise in prices
of foods that matters as it is that the money incomes of large num-
bers have fallen far short of a proportional increase. While retail
food prices for the j-ear 1918 were on the average 68 per cent higher
than similar prices for 1913, weekly wages of union-orgiinized labor
averaged but 30 per cent higher than in 1913.^ A week's wage in 1918
bought but 77 per cent as much food as in 1913. But this comparison
is for the wages of union labor. The larger number of service in-
comes do not fall within this organized group and are much slower
to respond to the pressure of a higher cost of living. Moreover, these
incomes are for the same reason usually less in amount. It follows
that for very large numbers of people receiving relatively small in-
comes, a vreek's wage in 1918 was purchasing much less than 77 ^Der
cent of the food it bought in 1913.
Section 2. â Effect of food prices on trade.
Prices of food, however, concern the comnumity not alone as con-
sumers of food but also as producers of commodities and there-
fore as participants in the trade of those commodities. Food absorbs
38.2 ^ of the average American household's income. It therefore con-
stitutes no inconsiderable part of the wage and salary cost in all pro-
' II. S. Department of Labor, Bureau of Lalwr Statistics, Monthly Labor Review, March,
1010, p. 115.
- Ibid., pp. 119, 120, IGO, 167. IncUulcd in the union-organized labor on which tlie
above percentage is based are the principal occupations in the building, granite and stone,
and metal trades, in freight handling, in the bakery, mill-work and printing trades, and
the occupations of chauffeurs, teamsters, drivers, laundry workers, theatrical employees,
and waiters. It should be pointed out that many trades are not included in this list, and
thai the pcrceulngo for any individual trade, whether in the list or not, may depart
coii;-idt rably from this average percentage.
â¢ Figures furnished by U. S. Department of Labor, Bureau of Labor Statistics.
14 WHOLESALE MARKETHSTG OF FOOD.
duction. Of two communities whose products enter the same markets
otherwise equally, that one which supplies its working people with
food at a lower community cost either will pay its workers a higher
real wage or will have a marked advantage in underselling the other
through lower production costs. Both results may in some measure
It is common knowledge that there has been a marked rise in the
food prices of all countries during the last five years. This rise has
been somewhat less in the United States than in some other countries,
for example, in England/ though such a comparison does not go to
the more fundamental idea of relative changes in community or na-
tional costs of food, and unless governmental restrictions on prices
and price-making conditions in the two countries are exactly similar
the comparison is not wholly a fair one. If, for example, one of these
two countries has a governmental regulation that the other does not
have, which fixes the producer's price of a food below competitive
costs and profits and provides for the making up of this deficiency
to the producer by the payment of a subsidy, the sales price of this
food represents something less than its national cost and basis for a
fair comparison is not found in the sales prices of the two countries.
Governmental restrictions during the war exigency have as between
various countries differed considerably in character and degree.
On the other hand a wise governmental policy toward the food
industries may lower production and distribution costs together
with the final sales price without proportionally increasing govern-
mental costs, thus reducing the national cost of food. It is the urgent
need and proposed content of such a policy toward wholesaling to
which this report seeks to direct public attention.
Section 3. â Analysis of food prices â Distribution as a factor.
It may be generally stated under present usage that there are five
fairly well defined stages through which food materials and foods
in industry pass. Each of these stages fulfills a useful purpose, and
for the social service involved in each of the first four, just and
reasonable compensation should be paid in the interest of stable and
ever-flowing commerce. The}' are broadly :
Production â the bringing into being of the raw material.
Manufacture â the preparation by manufacture, refinement, pre-
serving, or other process of conversion.
Wholesaling â the gathering together in large quantities of stores
of products of varied sorts and from widely separated sources. The
collections of such coumiodities by large shipments work for a
1 International Price Comparisons by War Industries Board, Bulletin No. 2, p. 19.
This comparisou is based upon 34 food commodities and shows the wholesale prices to be
for December, 1018, as compared to those for the year July, 1913-June, 1914, in England
131 per cent greater ; in United States 108 per cent greater.
WHOLESALE MARKETING OF FOOD. 15
lowered transportation toll and constant reservoirs of supplies at
natural distributing centers.
Retailing â the carrying in smaller amounts the varied sorts of
/ioods at convenient points in smaller communities for the immedi-
ate satisfaction of the needs of the consumer, and for his conveni-
Consuming â the end of the process and the purpose of it all.
In common usage the first and second of these stages are included
in the term production, and the third and fourth in the term distri-
The consumer of food has a vital interest in every factor which
atfects its price without at the same time affecting his money income
in like direction and degree. This follows since the operation of
such factors in such manner results in an increase or decrease of the
total satisfactions which the consumer may secure from his income.
Likewise the community as a producer, in competition with other
communities, is interested in these factors as having possible fa^â¢or-
able or unfavorable effect on relative production costs. These fac-
tors, many and varied, are measured in terms of money costs. The
price of bread, for example, may be affected by conditions of labor
in the baking trade, by the relative abundance of flour and other ma-
terials, by the relative ease of delivery of the finished product, or by
the conditions of competition between bakers. In the absence of di-
rect governmental price-fixing, the costs of labor, materials, and
delivery to the baker, and of competition to the consumer in the form
of baker's profits measure the relative importance of these factors,
and together with the costs of other factors go to make up the con-
It will be observed that some of these costs have to do with the
production of the commodity, others with its distribution. The con-
sumer, however, as consumer, knows no distinction between produc-
tion and distribution. Purely as a price consideration, it is a matter
of indifference to him whether price is three-fourths production
costs and one-fourth distribution, or vice versa. Indeed, for him
production is not completed till the connnodity is laid down at his
door, and for him the price at which the commodity is delivered is
cost â consumer's cost.
It is, therefore, quite as important from the consumer's standpoint
that costs of technical production be lowered as that costs of so-called
distribution be reduced. But, while there still remains much to be
accomplished in the former direction, greater success has here been
attained than in the latter. Quantity production which has been
enormously increased, and severely scientific methods which have
prevailed in many fields of production, particularly of manufactur-
ing, ha\e been, among others, factors in lowering unit costs, though
16 WHOLESALE MARKETING OF FOOD.
producers' profits have in some instances contributed unduly to con-
The costs of distribution, on the other hand, are for many food
commodities notably high. The term distribution is here used in its
commonly accepted sense as applying to the movement of a com-
modity, finished as to manufacture or growth, from the manufacturer
or grower to the consumer. It involves primarily a change of owner-
ship and secondarily whatever change in location as is necessary to
serve the uses of the consumer. The costs of distribution, as the lat-
ter term is thus defined, form no inconsiderable part of the final
price which the consumer has to pay for the foods which he pur-
chases, and these costs, together with attending wastes of foods, as
demonstrated in succeeding chapters with reference to wholesaling,
are unnecessarily high. While, of course, it is not contended that
these unnecessary costs and wastes in wholesaling are alone account-
able for rising prices, it is held that their elimination would in no
small measure act as a counteragent in checking disparity between
food prices and money incomes and would strengthen the nation's
position in its competition for world trade.
Section 4. â Uneconomical wholesaling of foods.
Improved marketing facilities and processes are everywhere, in
village as well as cit}^, urgently needed. Dealers generally recognize
this need. Producers are a unit in pressing for such improvement.
Consumers, through organization and press, have demanded that the
system of food distribution be simplified and the movement of food
be made most direct from field and factory to table, allowing only
for such delay in manufacturing and storing as is necessary to the
most economical disposition of products.
Evidence presented in this report ^^]lich would seem to place the
responsibility for the existence of any marketing condition on any
one individual or group of individuals or agency is not necessarily
conclusive in that respect and is not cited generally for that purpose.
Kather is it the object, primarily, in presenting this evidence to es^
tablish the thesis that marketing conditions are fundamentally bad.
It is deemed not of so nuich importance to assess the relative merits
of complaints where charges and counter charges have been made or
to determine the incidence or degree of individual blame as to
l^resent complaints which appear to be typical and which by their
number and serious import point to conditions requiring funda-
Makketing tacilities. â It is shown in this report that careless
handling, improperly equipped cars, delays in moving, and exposure
while foods are in railway transit to market are the causes of large
and unnecessary losses and expenses to dealers and shippers; that
WHOLESALE ^FARKHTING OF FOOD. 17
railway terminals are usually scattered, that they are not properlj^
equipped with cold, heated, and dry storage to prevent deterioration
hefore perishables can be removed, and that often they lack facilities
for the quick and safe handling of foods.
It is also shown in this report that buildings and other facilities
for the marketing of perishables in the vast majority of wholesale
receiving centers are entirely inadequate, are generally badly located
with reference to terminals, storage, and retailers, arc often con-
gested, and are invariably ill-adapted in construction and arrange-
ment to economical marketing. In several cities running above
100,000 in population, public storage facilities were found to be en-
tirel}' lacking and in others inadequate. Where storage is sufficient
it is often far from both terminals and wholesale centers.
As a consequence of the location of markets with reference to ter-
minals, storage, and retailers, a large amount of carting is necessary.
Congested and poorly paved streets, long distances, ill-equipped con-
vej'ances all make for useless expense and large losses of foods
If the wholesaling of foods is to be placed on an efficient basis, the
first and most obvious requirement is that respecting physical ecjuip-
meiit. Facilities adequate to every need should be provided for the
receiving, handling, storing, preserving, buying, selling, and deliv-
ering of specified foods. This requirement Avill not be met under
the present organization of the nuirkcting system. The benefits aris-
ing from the economical ])liysical handling of its food supply ara
dejiendent upon such jniblic action as vÂ»-ill secure the facilities re-
Marketing processes. â The work of the United States Food
Administration during the period of the war was directed through
education and regulation to secure in the main these five ends: xVde-
quate production, equitable and adequate distribution, limitation on
the cost and profits of distribution from producer to consumer, co-
ordination of CTOvernment purchases and sales of foodstuffs, and food
conservation. The two ends touching distribution directly concern