128 COMMERCE AND EXCHANGE 



A third means of regulating prices, known as the Factor or Rebate 

 Plan, is more elastic than the price contract. It has been used 

 chiefly between manufacturers and wholesalers, but is equally 

 applicable to retailers. According to this arrangement, after the 

 proper contracts have been made in writing, a manufacturer sells to 

 a dealer at a certain open price, giving the usual rebates for cash. It 

 is agreed that the dealer shall sell at a given price, and the differ- 

 ence between this and the manufacturer's price involves a small but 

 unsatisfactory profit for the dealer. At the end of a given period, 

 say six months, the dealer makes an affidavit to the manufacturer 

 that he has not sold his goods at less than the mentioned price; 

 thereupon the manufacturer pays to him a per cent of the original 

 purchase price in the form of an extra discount which, added to 

 the direct profits of sale, makes the transaction remunerative to the 

 dealer. The contract establishing these relations is so devised as to 

 take the form of creating the relation of principal and agent between 

 the manufacturer and dealer. The dealer is not bound to sell at a 

 given price, but he is paid a bonus when he does so. The rebate plan 

 has been most prominently applied in the sale of sugar. The so- 

 called Whisky Trust at one time used it. It is now used in a number 

 of the lines handled by grocers, such as soap and baking-powder. 

 The Pittsburg Plate-Glass Company employs it. 



Probably the most effective of the means now in use for regulating 

 retail prices is called the Serial Numbering Plan. As used by a 

 prominent manufacturer of medical preparations the plan involves, 

 first, an exclusive system of distribution. Only authorized whole- 

 sale houses handle the goods, and they are under contract to sell 

 only to the retail agents of the company. Every retail dealer, before 

 he can purchase the goods, must sign a contract by which he becomes 

 an agent of the manufacturer and agrees not to sell the medicines to 

 any other dealer who is not an agent at any price whatever, and to sell 

 to others only at the authorized retail price. Second, the system 

 provides a means of keeping track of goods. Each dozen of bottles 

 sent to the wholesaler bears a certain consecutive number, and with 

 it is a postal card having stamped upon it the same number. When 

 the goods are sold by the wholesaler he sends the card to the manu- 

 facturer with the name and address of the dealer to whom sold and 

 the date. The retailer must not sell or otherwise dispose of a bottle 

 until his firm name has been plainly written or printed across the face 

 of each wrapper. By this means if a bottle of the preparation is 

 anywhere sold at less than regular prices and the manufacturer can 

 ascertain the serial number, he can trace out the responsible agent. 

 The latter, on proof of price-cutting, becomes liable to the company 

 for specified liquidated damages. 



