February 



HARUWOOD RECORD 



17 



Association Activities Are Charted 



Correspondence Between Secretary of Commerce and Attorney General Throws 



Light on the Latter's Attitude Toward Trade Association Activities, Helping to 



Clear Up Some of Uncertainties Resulting from Decision in Hardwood Case 



The publication on February 16 of the eorrespondence between 

 Secretary of Commerce Hoover and Attorney General Daugherty 

 upon the activities of trade associations apparently clears up much 

 of the uncertainty concerning the attitude of the Department of 

 Justice toward these activities, which resulted from the decision 

 of the Supreme Court in the Hardwood Case. It does not appear, 

 however, to make that decision any more clear. 



In this correspondence Secretary Hoover assumed the general 

 propriety of trade associations and laid down the rule that the 

 objection to trade associations "does not go to the instrumentality, 

 but. to the abuse of the information that may be secured through 

 the collective means." He then put eleven categorical questions to 

 Attorney-General Daugherty. These questions, together with the 

 reply of the Attorney-General, indicate with more or less clarity 

 the activities which (according to the ojiinions of the parties to the 

 correspondence) trade associations may pursue and yet remain 

 within the law. 



It is readily apparent to those familiar with the present activities 

 of trade associations that the restrictions laid down in this corre- 

 spondence may render many of these current practices untenable 

 and severely limit the usefulness (to their members at least) of 

 many associations. The correspondence indicates that a trade asso- 

 ciation may follow no practice that gives its members a peculiar ad- 

 vantage over the public. An association must not be used as a 

 cloak to hide an agreement, scheme, understanding, or contract to 

 enhance jirices, restrain trade, curtail production, or eliminate com- 

 petition. And in the final analysis no association may escape con- 

 flict with the law, or rather, the Department of Justice, no matter 

 how legal its organization may be in form, if it has the effect of 

 doing these things. In the matter of statistical activities, such as 

 those against which the American Hardwood Manufacturers' Asso- 

 ciation was enjoined by the Supreme Court, the correspondence 

 suggests that these may not be practiced except the data gathered 

 by the association be cleared through the Secretary of Commerce. 



That is, data on production, consumption, stocks on hand, prices, 

 etc., may be gathered and compiled by a trade association but this 

 Information can not be distributed directly and exclusively to the 

 members of the association. It must be sent to the Secretary of 

 Commerce so that he may make it available to the general public 

 or any others who ma}- be interested, at the same time it becomes 

 available to the members of the association. In short, an associa- 

 tion may secure for itself no statistics on conditions in its industry 

 that it does not share with the public on equal terms with its mem- 

 bers. In the matter of uniform cost accounting it is shown that 

 while an association may formulate and recommend to its members 

 a uniform system of determining costs, the members of an associa- 

 tion so doing may not exchange information on the costs deter- 

 mined through the operation of the system. 



Opinions differ as to whether this correspondence makes any 

 real contribution to the definition of legal and illegal trade associa- 

 tion practices and whether it may be used as a guide bj' which trade 

 associations may determine what they may and may not do. It is 

 contended that at best this correspondence expresses onh' the opin- 

 ions of the Secretary of Commerce and the Attorney General. 

 These opinions, the reasoning goes, must in the last analysis be 

 subjected to the judgment of courts just as the opinion of any 

 other private citizen must be. In other words, that the guess of 

 one well-informed man as to what the attitude of the courts will be 



to a given trade association practice is as good as another and that 

 the only way to secure a definite determination is to submit it to the 

 courts. This reasoning is predicated upon the assumption that in 

 the Hardwood case the Supreme Court laid down no chart of trade 

 activities and established no principle, but merely expressed its 

 opinion of an especial and peculiar set of facts. The decision 

 might differ, it is assumed, on virtually the same methods as those 

 involved in this case if the court thought these methods were pur- 

 sued under differc.it circumstances and with supposedly different 

 results. 



The interesting correspondeiu-e follows in full: 



Secretary Hoover Establishes the Premises 



Washington, D. C. February .% 1922. 

 My dear Mr. Attorney General : 



The situation regarding the activities of legitimate trade associations 

 is more disturbing now than at any time since we first discussed the 

 matter, and since Mr. Lamb was advised by Colonel (Joff and Mr. Fowler 

 that it was your desire that I present an informal, interdepartmental 

 inquiry regarding the present status of the law relating to legitimate 

 trade associations and the extent that they may engage in legitimate 

 co-operative activities, I have made a further survey of the matter, and 

 the questions hereinafter presented seem to me to be vital to trade asso- 

 ciations based on present information secured through recent investiga- 

 tion. 



It may not be out of place to call your attention to the organic act 

 which created the Department of Commerce, which imposed upon the 

 department the duty "to foster, promote and develop the foreign and do- 

 mestic commei-ee. the raining, manufacturing, shipping and fishery indus- 

 tries, and the transportation facilities of the United States." In obeying 

 the commands of the statute, it seemed to me that the department should 

 employ all available legal means to get into the closest possible touch with 

 industry in all its forms and secure the best information possible regarding 

 the needs and necessities of trade and commerce. If the department has 

 to help, aid, and assist industry, it must, of course, be conservant with 

 the facts and conditions influencing the carrying on of trade. The exist- 

 ence of a large number of trade associations being well known prompted 

 me to make inquiry regarding their forms of organization and the func- 

 tions they were performing to ascertain whether or not they could be 

 utilized as a means for securing trade iut'drmation that would properly 

 aid the department in performing its duties. My inquiry into the affairs 

 of trade associations was not with the idea of creating a new scheme tor 

 carrying on business, but solely tor the purpose of ascertaining whether 

 or not they could properly be utilizc<l in furnishing information that would 

 not only be helpful to the department and to the commercial world but 

 to the public generally, always keeping in mind that whatever activities 

 were carried on by such associations, they should of necessity be within 

 the terms of existing law. In the course of my inquiry. I discovered that 

 certain trade associations were involved in litigation which questioned 

 the legality of their performances, and, by reason of the litigation, there 

 was much doubt and contusion regarding the legal limits within which 

 trade associations could properly operate. This situation seemed to call 

 for conferences with your department, which you have graciously afforded, 

 and although no definite determination has heretofore been reached regard- 

 ing the policy to be pursued. I realize the difficulties that confront you In 

 attempting to reach a proper conclusion, and while a public announcement 

 from you would have been most helpful to all, I most heartily acquiesce in 

 your suggestion that the matter be presented as an informal interdepart- 

 mental inquiry tor my guidance in performing the duties imposed upon 

 me by the organic act creating this department. 



Trade Association Fundamentals 



So much has been said in the various conferences, coupled with lapse of 

 time, in order to obviate excusable failures in memory as to the matters 

 that have heretofore been discussetl and to make clear the position and 

 views of this department, I desire to offer some preliminary observations 

 regarding trade associations before asking the specific questions heretofore 

 set forth in various informal memoranda and upon which I desire the 

 informal expression of your views. 



Commercial progress in industry has always been measured by the 

 advance in knowledge of those engaged in industry. It is impossible for 



