THE FEDERAL TRADE COMMISSION
JANUARY 10, 1921
FEBRUARY 18, 1921
JUNE 9, 1921
FEBRUARY 15, 1922
GOVERNMENT PRINTING OFFICE
FEDERAL TRADE COMMISSION.
NELSON B. GASKILL, Chairman.
JOHN F. NUGENT.
J. P. YODEB, Secretary.
OF THIS PUBLICATION MAY BE PROCURED FROM
THE SUPERINTENDENT OF DOCUMENTS
GOVERNMENT PRINTING OFFICE
WASHINGTON, D. C.
20 CENTS PER COPY
REPORT OF JANUARY 10, 1921, ON PRELIMINARY SURVEY OF LUMBER MAN-
UFACTURERS' NATIONAL AND REGIONAL TRADE ASSOCIATIONS.
Letter of transmittal x
National Lumber Manufacturers' Association 1
Regional associations . 2
Regulation of production 2
Stumpage values and excess profits taxes 4
Functions of the national as seen by some west coast manufacturers- 6
Government Relations Committee , 8
Attitude of national toward reforestation 8
Southern Pine Association 10
Price activities during prewar period 11
Price activities during war period ^ 15
Price activities in post-war period 21
Prices and margins of profit , 27
West Coast Lumbermen's Association ' 30
Price activities 30
Miscellaneous activities 35
Western Pine Manufacturers' Association 36
Price activities 36
Other activities _'__ 38
Northern Hemlock & Hardwood Manufacturers' Association 38
Bureau of statistics and educational information 39
Michigan Hardwood Manufacturers' Association 40
Committee on market conditions 41
Legal advice and its application 41
Curtailment of production 44
Cooperation among regional associations _ . 44
Purpose of cooperation , 44
Cooperation between southern pine and west coast lumbermens' asso-
Cooperation between Wisconsin and Michigan hemlock manufac-
Chicago Retail Lumber Dealers' Association 50
Compilation of costs 51
Reports of sales 51
Pooling of business 52
REPORT OF FEBRUARY 18, 1921, ON SOUTHERN PINE ASSOCIATION OF NEW
Letter of transmittal 56
Trade-barometer device 57
Curtailment of production 59
Prices and profits 61
Concerted actions on prices 62
Market conditions subsequent to Commission's investigation 63
Propaganda for price maintenance 64
General purposes of lumber manufacturers' associations 64
REPORT OF JUNE 9, 1921, ON DOUGLAS FIR LUMBER MANUFACTURERS' AND
Letter of transmittal 1 68
Organizations of producers in douglas fir region 71
Price activities of West Coast Lumbermen's Association 71
Current market quotations 76
Restriction of production under auspices of West Coast Lumbermen's
Cooperation between West Coast Lumbermen's Association and Western
Pine Manufacturers' Association 78
Price and curtailment of production activities of loggers' associations 80
Relation between the fir log and lumber markets 82
Manufacturers' profits as affected by loggers' association activities 83
Long continuance of foregoing practices 84
Increasing importance of douglas fir region as source of supply 85
Conditions in timber ownership of douglas fir region 86
Relation of lumber manufacturers to retail prices 87
REPORT OF FEBRUARY 15, 1922, ON WESTERN PINE MANUFACTURERS' ASSO-
CIATION OF PORTLAND, OREG.
Letter of submittal 90
Summary - 92
Origin and scope of lumber inquiry by Federal Trade Commission 95
Position and influence of Western Pine Manufacturers' Association in
the industry 96
Organization : 96
Concentration of timber ownership in association territory 96
Price activities [ 97
Pre-war price activities 99
Price activities during war period 100
Post-war price activities 104
Prices, costs, and margins 108
Comparison of average costs with average prices 111
Admission of unreasonable prices during 1919 112
Position and influence of Western Pine Manufacturers' Association in the
industry Continued. Page.
Subsequent course of the market 113
Analysis of present prices 114
Comparison of present prices with war-time prices 115
Idaho white pine 115
Western yellow pine 115
Comparison of present prices with 1920 " runaway " market prices 115
Price activities of box bureau 116
Price activities of Montana Lumber Manufacturers 119
Relations between association's price fixing activities and its use of com-
mon freight basing point , 121
Relations between association's price fixing activities and practice of
scant sawing 123
Relations between association's price fixing activities and uniform dis-
counts to and discriminatory classification of wholesale trade 127
Open price features of Western Pine Manufacturers' Association methods. 130
Cooperation between Western Pine Manufacturers' Association and West
Coast Lumbermen's Association 132
Cooperation between Western Pine Manufacturers' Association and Cali-
fornia and Minnesota pine producers 136
Restriction of production under auspices of Western Pine Manufacturers'
Analysis of production policy during 1920-21 147
Long continuance of foregoing activities by Western Pine Manufacturers'
The Federal Trade Commission collects and presents in this vol-
ume four reports dealing with lumber manufacturers' national and
regional trade associations, each of which was separately issued but
not printed. These reports result from an inquiry made by the
Federal Trade Commission at the request of the Department of
The volume contains four parts, each complete in itself, as follows :
Part 1. A general survey of the Lumber Manufacturers Trade
Association, National and Regional. The subsequent reports treat
specific regional associations.
Part 2. The Southern Pine Association.
Part 3. The Douglas Fir Lumber Manufacturers and Loggers
Part 4. Western Pine Manufacturers Association.
FEDERAL TRADE COMMISSION.
MARCH 29, 1922.
PRELIMINARY SURVEY OF LUMBER MANUFACTURERS'
NATIONAL AND REGIONAL TRADE
LETTER OF TRANSMITTAL.
FEDERAL T&ADE COMMISSION,
Washington, January 10, 1921.
To the President of the Senate and the
Speaker of the House of Representatives:
The attention of the Federal Trade Commission has been directed
to the congressional inquiry upon the subject of housing and recon-
struction through the hearings before the Committee on Housing and
Reconstruction of the Senate, at which time certain statements have
been made respecting the activities of those engaged in the manu-
facture and sale of building materials.
Recently, at the request of the Department of Justice, an exten-
sive survey of all the associations of lumber manufacturers through-
out the United States has been made. The data collected, as fast as
it is analyzed, is being transmitted to the Department of Justice.
The Commission, being of the opinion that certain data typifying
the actions of the lumber manufacturers through their respective
associations will be responsive to the congressional inquiry, submits
some information which it has in its files to the Congress, pursuant
to the powers granted to it under section 6, paragraph (f), of the
Federal Trade Commission act, which is entitled, "An act to create
the Federal Trade Commission, etc.," approved September 26, 1914.
The data herewith transmitted reveals the activities of the lumber
manufacturers through their national and regional associations and
shows their attitude and activities toward national legislation,
amendments to the revenue laws, elimination of competition of com-
petitive woods, control of prices and production, restriction of re-
forestation, and other matters.
The documents submitted are merely informative, and should not
be regarded as comprehending all the information with the Com-
By direction of the Commission:
HUSTON THOMPSON, Chairman.
LUMBER MANUFACTURERS' TRADE ASSOCIA-
Part 1. PRELIMINARY SURVEY OF LUMBER MANUFAC-
TURERS' TRADE ASSOCIATIONS.
NATIONAL LUMBER MANUFACTURERS' ASSOCIATION.
The lumber consumed within the United States comes from ap-
proximately 10 different regions within the United States. In each
region there is manufactured a certain kind of lumber which forms
the great bulk of the region's output. The principal kinds of soft-
wood lumber are southern yellow pine, Douglas fir, western yellow
pine, and hemlock. Our largest source of supply is the southern
yellow pine region. Douglas fir lumber is next in importance.
Figure 3, page 17, and Table 7, page 18, of Bulletin No. 845 of the
United States Department of Agriculture, shows the relative and
total amount of each kind of lumber produced in each region for
the year WLS^In each region a majority of the manufacturers
therein have formed an association for the expressed purpose of
bettering conditions in the marketing of their lumber. These regional
associations have formed a national association, known as the Na-
tional Lumber Manufacturers' Association, with headquarters at Chi-
cago, 111. Each regional association compiles statistics upon produc-
tion, market conditions in general, sales reports showing actual prices
obtained for lumber, and establishes and maintains uniform grading
rules. Several of them maintain a uniform cost accounting system.
Various other activities are undertaken to accomplish the purpose of
The national association receives statistics upon production and
consumption from each of the regional associations, summarizes the
same and distributes these summaries to the lumber manufacturers
through the regional associations.
The national association compiles other statistics bearing upon
the lumber industry in general. It has also been very active in
legislative and governmental affairs which affect this industry.
Mr. L. C. Boyle, a Kansas City attorney, with offices in Washington,
D. C., is employed to attend to such matters for the national asso-
ciation. He also represents many of the regional associations.
2 LUMBEH KA-tfUFACTURERS TEADE ASSOCIATIONS.
The principal regional associations represented in the National
Lumber Manufacturers' Association, are as follows:
1. Southern Pine Association (manufacturers of southern yellow
2. West Coast Lumbermen's Association (manufacturers of Doug-
las fir lumber).
3. Western Pine Manufacturers' Association (manufacturers of
western white and yellow pine).
4. Northern Hemlock and Hardwood Manufacturers' Association
(manufacturers of hemlock and hard woods in Wisconsin and upper
5. Michigan Hardwood Manufacturers' Association (manufactur-
ers of hemlock and hard woods in Lower Peninsula of Michigan).
6. Northern Pine Manufacturers' Association (manufacturers of
Minnesota and Wisconsin northern pine).
7. North Carolina Pine Association (manufacturers of yellow pine
8. Georgia-Florida Sawmill Association (manufacturers of yellow
9. Southern Cypress Manufacturers' Association (manufacturers
of cypress lumber).
10. California Sugar and White Pine Manufacturers' Association.
11. Redwood Manufacturers' Association (manufacturers of Cali-
Other sources of supply are Pennsylvania manufacturers of hem-
lock, who have no regional association, and the New England spruce
manufacturers, who do maintain a regional association.
Regulation of production.
The members of the national association have advocated for many
years that they should be permitted to concertedly regulate the pro-
duction of lumber for the expressed purpose of conserving the na-
tional resources. Extensive hearings along this line were held by
the Federal Trade Commission during the year 1915. Efforts were
made to induce the forest service department of the United States
Department of Agriculture to aid the lumbermen in this direction.
The entire plan was fully described by Mr. Chas. S. Keith, president
of the Southern Pine Association and one of the leading spirits of
the national association, in a letter, under date of October 22, 1915,
to Daniel Howard, of Clarksburg, W. Va.
This letter was in part as follows :
You would probably be interested in a talk which I have recently had with a
member of the Forestry Department of the Federal Government, who are con-
ducting an investigation of the lumber industry for the Federal Trade Com-
LUMBER MANUFACTURERS' TRADE ASSOCIATIONS. 3
mission in connection with the hearing which we recently had with that body on
this subject. I am enclosing you herewith a copy of the statement which the
Southern Pine people made before the Federal Trade Commission in this case,
which relates to the trust acts and to cooperation.
In this connection, the Forestry Department is working along the lines that
we are, and they have recently made a survey of lumbering conditions, costs of
production, and all matters entering into the operations of the West Coast
lumbering interests, including fir, redwood, and western pine, and are now mak-
ing the same investigation as to Southern Pine. They are recommending :
1st : That the Government withdraw all of its timber from the market ;
2nd : That the lumber industry be permitted to enter into agreements to pro-
duce no more lumber than the market will assimilate, regulating the supply to
the consumption ;
3rd: That they be permitted to enter into cooperative sales agencies, not to
have more than 50% of the product in one sales agency ;
4th : That they be permitted to enter into price agreements, until such time as
the price agreement might become unreasonable, fixing a minimum price at
which lumber shall be sold ;
5th : That they be ordered to have uniform methods of accounting ;
6th : That the average cost of production shall be distributed to the items pro-
duced, and that a cost list be prepared on which lumbermen may sell their
product instead of upon a price list as at present ;
7th : The measure of the reasonableness or unreasonableness of the price
agreement to be fixed on the following basis :
(a) That the cost of manufacturing property be divided by the amount of
timber behind the mill, fixing a sinking fund for extinguishment, this extinguish-
ment in no case to exceed 20 years.
(b) That they shall charge to their operations the price for raw material
based on the cost of replacement at the beginning of any year ;
(c) That they be permitted to earn 12% on the original cost of the manufac-
turing plant ;
(d) That they be permitted to earn 7% on their quick assets, such as stocks
of merchandise, lumber, and bills receivable, and lastly ;
(e) That they be permitted to earn 7% on the raw material, based on a
Mr. Keith further explained that it would be necessary to advance
the price on southern pine lumber $13.75 per thousand in order to
put this plan in effect, which would have been equivalent to $196,-
000,000 on the whole southern pine output. This would have practi-
cally doubled the average price then in effect.
Further light upon the aims of the lumber manufacturers is shown
in a letter written by Mr. Edward Hines, under date of December
9, 1916, to Mr. M. B. Nelson, of the Long-Bell Lumber Co., giving
an account of a conference "with a prominent official of the steel
people " about conditions in general, Mr. Hines wrote in part :
He acknowledged all this pleasantly, but added that the steel people were
passing on to the ultimate consumer not alone the added cost of doing business,
but also an additional profit, and that apparently the lumbermen were so dis-
organized, so afraid of the so-called laws prohibiting them doing anything of this
kind, that we were really suffering from our own weakness. He seemed to be
pretty well informed on our business. Unfortunately I had to acknowledge the
4 LUMBER MANUFACTURERS' TRADE ASSOCIATIONS.
corn. We apparently all know the nature of the disease we are suffering from
and also know the nature of the proper cure for it, but seem to lack the courage
to take the cure. Conservatively speaking, I think all sides now are earnestly
hoping for a legal relief whereby we may be permitted to get together in groups
and take care of our business along the lines compatible with conditions. Our
conditions show clearly that the days of individualism are gone and we are badly
in need of the same treatment as the steel people were successful in having ad-
The bill Mr. Keith is working on at Washington, covers to my mind, pretty
well the cure and I do earnestly hope that nothing will happen to him to prevent
his continuing on it.
Before leaving Chicago yesterday noon I arranged to have some of the Chi-
cago newspapers arrange to give considerable favorable publicity in the way of
urging everyone, particularly the chambers of Commerce, to act favorably on
the referendum vote on this measure, giving them some brief facts why it was
in the interest of posterity, and to the interest of present labor and manufac-
turers, to unite on something whereby relief could be had for these new condi-
It seems as if the entire lumber industry looks to Yellow Pine; if the price
of Yellow Pine can be maintained, everything else apparently can take care of
itself, and there should be some intelligent exchange of ideas between the Yel-
low Pine people, and especially the Fir manufacturers. We have got to get firmly
settled in our minds, with the changed conditions taking place, that an advance
of a matter of 25 or 50^ means nothing when you face an extra cost of log-
ging and manufacturing of more than $3.00 and we should get an average of
$5.00 more for lumber next year to get about the same returns for our stumpage
with a very small additional manufacturing profit. The trouble is the lumber-
men can apparently not get into their minds what their product is really worth
compared with everything that comes in competition with it. I have just heard
of a recent sale of the Weyerhaeuser companies of a large tract of timber in
Louisiana, and considering the price they received for it, Yellow Pine should
bring today at all mills not less than a $20.00 average, to give parties who
bought this timber, any material handling, of the timber they bought. To my
mind it means $7.00 stumpage, and adding to it the cost of logging, manufactur-
ing and selling they cannot materially make any money at less than a $20.00
Stumpage values and excess profits taxes.
While Congress was considering the enactment of revenue laws to
provide for funds to meet war expenses, representations were made
to Congress by the lumber manufacturers that in estimating their
investment as a basis for computing costs they be permitted to take
the market value of stumpage as of March 1, 1913, rather than the
actual cost of said stumpage.
The importance of this difference was indicated in a letter of Mr.
Chas. S. Keith to Mr. Wilson Compton secretary of the national
association, under date of November 27, 1918, in which he wrote :
I do not think it is well, at least not psychological, to attract attention to the
extent in dollars and cents to which the industry may be affected, and believe
it would be better to direct attention to the inequalities produced on the basis
of the situation as applied to each thousand feet of lumber produced.
LUMBER MANUFACTURERS 7 TRADE ASSOCIATIONS. 5
There is no question the Government needs funds and there is no disposition
on the part of manufacturers of lumber not to pay their just proportion of
taxes, but I am afraid if it is shown there is Two Billion Dollars more
invested capital in the business than the definition will permit, a deduction of
ten per cent on w r hich would mean a loss of Two Hundred Million Dollars in
taxes, it might have the effect of causing the Senate Committee to conclude to
let the proposition stand and permit the courts to determine whether or not
the interpretation of the Treasury Department is correct or otherwise. I,
therefore, suggested to Mr. Boyle that he eliminate that feature ; in fact insisted
upon it, but on considering the matter he agreed with me as to the desirability
of not laying stress upon this point.
Secretary Compton, in replying on November 29, said:
The prominence of my mention of the amount of a billion and a half or two
billion dollars as the total amount involved is rather for home consumption, so
that lumbermen themselves might know what the proper solution of this revenue
matter means to the industry in dollars and cents.
Replying to Secretary Compton, on November 30, Mr. Keith said :
I am afraid we may bring the attention of Congress to the loss of income,
which might accrue by writing off the books Two or Three Billion dollars of
invested capital, which might lead us into more serious difficulties.
The revenue law was amended as requested, so that it became neces-
sary in the year 1919 to determine stumpage values as of the year
1913. It was necessary for the Internal Revenue Department to se-
cure the services of a practical lumberman to aid in this work. With
reference to this entire matter Mr. Boyle wrote Mr. E. A. Selfridge
on March 5, 1919, as follows:
There is no man in the entire field more competent than Dr. Compton to
work out a plan, and have the details worked out under his observation. Comp-
ton has the confidence of the Department and with Compton's approval on data
thus gathered I am quite sure that Roper would be disposed to consider it as
practically authentic. Compton could take a man like E. T. Allen and turn
over to him the responsibility of working out the details of the timber phase
of the general problem. For, after all, it is the raw material supply that
constitutes the outstanding problem to be solved. George Ward of the Georgia-
Florida Association, is a man of practical accountancy experience, now being
the auditor of the Georgia-Florida Association, he has also had mill experience.
To him could be turned over the auditing phase of the problem, and so on
down the line. Thus we could develop as to the various regions of the industry
correct principles covering questions of depletion, depreciation, and invested
capital. The possibilities of the plan are unlimited.
I am telling the suggestion to you in order that I may lead up to another
suggestion; Commissioner Roper will still need the services of an experienced
man familiar with the lumber problem. In canvassing the field with Allen he
has suggested the name of Major D. T. Mason, now connected with the Uni-
versity of California. I know Mason and he would be perfectly satisfactory.
The query is could he afford to make the sacrifice? It is possible that Mason
Is tied up by contract. Now, somebody with experience and sympathetic
understanding has got to take this job. Among the operators either Charlie
Keith, Ed Hazen or yourself would be capable of working out the technique of
the plan within the Department but, of course, neither one of you three men
6 LUMBER MANUFACTURERS' TRADE ASSOCIATIONS.
can afford to leave your business. The type of men who are employed and
who might be capable can not afford to give up a larger salary to take the
smaller one. So whichever way we turn we are met with these serious
One of the conferences of the lumber manufacturers with the
representative of the Internal Revenue Department was described
by Mr. Robert Ash, assistant to Mr. Boyle, in a letter to Secretary
Compton, dated June 20, 1919, as follows :
This is to let you know the progress that has been made at the conference
with Mr. Mason. Mr. E. T. Allen took charge of the meeting on the 18th and
handled it in a splendid manner. The first morning was devoted to a general
discussion in which it was endeavored to create on the part of the lumbermen
a proper frame of mind. That unquestionably was a wise move, as there were
one or two men in the delegation who seemed to have a rather hostile attitude
toward the Bureau of Internal Revenue, to wit : Mr. Holt and Mr. L. C. Bell.
It took some little time to make some of these men come to the realization
that whatever efforts were being made were made for their benefit. The atmos-
phere soon cleared, however, and I believe all those present have been looking
at the situation from the right viewpoint.