18 



HARDWOOD RECORD 



October 10. 1921 



Sweeping Attack Made on Eddy's "New Competition" 



Tlie sui)]il('UK'iital bripl' filed by tlio (iovcrniiifnt in tlie final argii 

 nicnt of the famous case of the American Column & Lumber Com- 

 pany, et al, appellants, vs. the United States, which will be heard 

 l)y the U. S. Supreme Court on October 11 or 12, makes a sweeping 

 attack upon "co-operative" or "open price" practices, as ex- 

 pounded in Eddy's book, "The New Competition," and followed 

 by various trade associations. 



The Government's brief declares that "this case for the first 

 time presents directly for the consideration of this court the prac- 

 tices of those organizations which are known as 'Open Price Asso- 

 ciations,' " It then says that this open price plan is the direct 

 result of the efforts of "astute business men'.' to "devise some 

 scheme so adroitly formulated that it would accomplish the same 

 results as had been accomplished by methods," which the court 

 had "condemned in numerous eases brought to enforce the Anti- 

 trust Act of 1890," and "yet not be violative of the provisions of 

 the Anti-trust Act as it had then liceii construed in any specific 

 case." 



That this "new competition" or "open competition," as devised 

 by Eddy, is no competition at all, is then contended by the Govern- 

 ment advocates, who invoke the shade of that venerable lexicog- 

 rapher, Noah Webster, to help prove their point. The Webster and 

 Kddy definitions of competition are contrasted: Webster defines 

 competition as ' ' The effort of two or more parties, acting inde- 

 pendently (tlie italics are from tlie brief), to secure the custom of a 

 third party by the offer of the most favorable terms.' And Eddy de- 

 fines this 'new competition,' according to the brief, thus: 'Rivalry — 

 competition in its broadest significance — is tlie earnest, intelligent, 

 frien-dly striving of man with man to attain results ienefici^jl to 

 both.' " 



The Government maintains that the associations operating under 

 the Eddy plan rightly employ the word "co-operation," as their 

 slogan, as "the meanings of the two words 'competition' and 

 'co-operation' in political economy are directly opposed to each 

 other. . . . True competition has been the same as long as men 

 have engaged in trade. . . . There is no such thing as 'new com- 

 petition ' in the sense here used. ' ' 



This brief was prepared by James M. Beck, Solicitor General, 

 and James A. Fowler, Special Assistant to the Attorney General 

 of the United States, and is designed to answer a supplemental 

 brief which will be filed by Gen. L. C. Boyle, chief counsel for the 

 American Hardwood Manufacturers' Associations and the appel- 

 lants involved under the attacks on the "Open Competition" plan. 



According to opinions expressed by the counsel for the appellants, 

 the Government 's brief is merely a rehash of the original brief and 

 fails to reveal any new argument or evidence. 



But the stress that the Government brief lays on the alleged 

 illegality and subversiveness of the Edd.v plan is interesting to all 

 trade associations, as it emphasizes the fact that the hardwood case 

 is a test case, by which the Department of Justice proposes to 

 determine the exact limitations of the co-operative efforts of the 

 members of a given industry in an association. Upon the decision 

 that will result hangs the future not only of the open competition 

 plan membership of the American Hardwood Manufacturers ' Asso- 

 ciation, but of nearly every important trade association in the 

 country. 



The members of the lumber association feel that they are ex- 

 tremely unfortuiinto in having been singled out for the test, but they 

 still maintain confidence in the ultimate justification of their plan, 

 though they have lost on ever.v count since the Government In-ouglit 

 its suit in equity in the Federal Court at Memphis in February, 1920. 

 They believe that the Supreme Court will mitigate the sweeping in- 

 junction granted by the late Judge John E. McCall and afterward 



sustained by the Supreme (.'inirt penrling the outcome of final hearing. 



In their denunciation of Eddy 's plan the Government attorneys 

 admit that the "members of an association may strive together to 

 attain results beneficial to all," but maintain "that such striving 

 would not jiartake of the nature of an effort by each acting inde- 

 pendently to secure patronage for himself individnally of a third 

 party. In fact, the word ' competition ' has no place in a description 

 of the activities of these associations. As the history of their develop- 

 ment and the literature promoting their adoption show, their chief 

 design was to destroy competition and to substitute therefor co- 

 operation. 



Men engage in busines.s, not for amusement, but for profit, and they 

 will not ordinarily devote their time to the promotion or maintenance of 

 a scheme which will not increase their profits. Of course, more accurate 

 knowledge as to methods of conducting their l)usiness may aid them in 

 reducing their expenses, and thus increase their profits ; but when one 

 uses a method which requires less expense than the methods of his 

 competitors he is usually not anxious to secure its adoption by them. 

 Undoubtedly there are activities in which all may naturally engage in 

 concert in an effort to secure mutual benefit, but tbost- activities have 

 nothing to do with competition between the individuals so engaged. For 

 illustration, it would be to the advantage of all hardwimd lumber manu- 

 facturers for the use of such lumber to be extended into new fields, 

 or for such legislation to be passed or treaties made as will promote the 

 exportation of such lumber. And it would be to the mutual advantage 

 of the manufacturers of one section to secure a reduction of rates to the 

 centers of consumption, while the manufacturers of another section 

 might well act in concert in opposition to such reduction in order to 

 avoid the more acute competition which it would produce. Concerted 

 action aUmg such lines can be easily understood and create no suspicion. 

 But when men selling in the same market and Aeekinu the same 0U8- 

 tamers join hands in doing tlie very things that real competitors never 

 have done — things which are directly and fundamentally opposed to 

 every element of competition as defined and understood hy all political 

 economists, and as understood by Congress ichett the antitrust law was 

 passed, sueh conduct naturally excites suspieion, and is deserring of the 

 closest senitinti. The ultimate aim of such conduct upon the part of 

 each individual is to increase his profits, and as profits /depend upon 

 the price of the product, his aim is to get more money for his output 

 than otherwise he would receive. In fact, this is not denied by the 

 promoters of the "Open price plan :" hut they say it is accomplished by 

 stabilizing the price, which means that the price will he made nearer 

 constant at an average price higher than would be the average if the 

 market were not thus stabilized. 



Now, what is the natural result of such a scheme as is presented In 

 the evidence in this case — that is, by the weekly exchange of the prices 

 of all sales made, figured at a certain point ; of monthly reports of all 

 stocks on hand, sold and unsold, of all raw material on the .vard, and 

 prospective production : of the distribution of a monthly discussion 

 engagecl in b.v each member relating to the prospects for future business, 

 and especially to prices, each being animated with a desire to have 

 his product bring the highest price possible ; of a letter prepared by the 

 statistician presenting a summary of the situation, if not in a false 

 light, at least in the light the most favorable facts will permit ; and of 

 frequent meetings where every element entering into production and 

 prices are personally discussed and views are freely exchanged as to 

 production and prices? In other words, where everyone exposes to every 

 potential competitor ever.v detail of his entire business, and especially 

 those relating to prices of their common product, and then meet and 

 personally discuss those details, is it possilde for any real competition 

 to exist among persons so affiliated'' Certainly not. If real competition 

 should develop, the organization would immediately fall to pieces, because 

 every member who had been undersold would feel that be had been 

 wronged, and thereafter would look upon such competitor as an enemy. 

 The very existence of such an organization depends upon the implied, if 

 not formal understanding, that every member will respect the supposed 

 rights of all others, that no member will commit an act which will result 

 in injury to any one or all of the other members, but that each will so 

 conduci his business that it will result in the mutual benefit of all. 



The operation of this plan is far more efBcacious in controlling prices 

 than an actual agreement fixing prices between the same persons. 



This line of argument is pursued at much further length and the 

 brief concludes with a number of theoretical citations of the 

 alleged evil results of open price practices and citations of actual 

 decisions adverse to these practices, made by courts under the 

 Anti-Trust Laws. 



