ECONOMIC ACTIVITIES NARRATIVE MISSION SUMMARY The Economics Activities mission has two principal components. First, it collects economic and financial statistics and prepares aggregate reports on competition in the American economy. In this respect, the most important program is the Line of Business financial statistics program. Second, it conducts investigations into competitive conditions and business conduct in selected industries. Financial and Statistical Reporting A major effort of this mission will be the collection, analysis, and publication of aggregate economic statistics on the manufacturing, wholesale and retail trade, and mining sectors. The most important statistical reports activity during fiscal 1976 will be continued implementation of the Commission's Line-of-Business (LB) Reporting Program, approved in final form by the Commission in fiscal 1974. The initial round of data collection was initiated in August 1974. It requests, by line-of-business, a company's sales, direct costs, advertising and promotion expenditures, research and development outlays, and assets. After aggregation, these data will be published in a report in mid-fiscal 1976. The collection effort simultaneously provides an opportunity to perfect, in cooperation with reporting firms, the definitions and forms for subsequent years' programs. In early fiscal 1976, the second round of questionnaires is expected to be mailed. These will ask each corporation to provide a complete report on its sales, costs, and profits by line-of-business. Consultations between Division of Financial Statistics personnel and the surveyed companies will be sustained to resolve remaining cost accounting problems. During fiscal 1976, the Commission expects to publish its first full report on line-of-business performance and profitability. This will be a milestone in the analysis of the American economy. It will substantially increase the quality of information available concerning corporate financial performance on an industry-wide basis. Other major statistical reports include the Quarterly Financial Report (QFR) series and the annual Report on Mergers and Acquisitions. Both programs have been expanded in coverage and improved in accuracy during the past two years. In addition, data from the Corporate Patterns Survey, analyzing 1972 sales by product class for the 1, 000 largest manufacturers, will be processed. Industry Analysis A second major effort of the Economic Activities mission will be in-depth studies of business conduct in several industries. The results of these staff studies may include recommendations for changes in the Commission's enforcement policies or for modifications in existing laws. 53-212 O 75 pt. 7-6 Among the studies begun in fiscal 1975 and reaching full momentum in fiscal 1976 will be: In addition to these new activities, the Commission will continue its special studies in a number of selected industries. It will also work on such subjects as product quality, consumer information, and advertising. Program Name: Quarterly Financial Report Description of Problem Area PROGRAM SUMMARY Program No: FOL Date Prepared: 4-23-75 The The Quarterly Financial Report series is processed and published by the Division of Financial Statistics. The QFR program provides universe estimates of income statement and balance sheet items by size, class, and industry categories. No Program Objectives 1. 2. To publish a quarterly report containing universe estimates based on aggregated income statement and balance sheet items collected To provide preliminary estimates and special tabulations to selected government users on a timetable consistent with their needs. Program Name: Market Structure Studies PROGRAM SUMMARY Program No: F02 Date Prepared: 4-23-75 Description of Problem Area There is a great need for better information on the relationship between the structure of industries (seller and buyer concentration, barriers to entry, etc.,) and their performance (profitability, efficiency, progressiveness, etc.). Since the Commission seeks to allocate its antitrust resources to cases and projects of the greatest economic importance, identification of those industries with apparent anticompetitive structure, conduct, or practices is necessary. The line-of-business and corporate patterns programs will provide data of a much higher quality than has previously been available. The staff will use the data (at an industry level of aggregation) to improve our basic understanding of the relationship between market structure and performance. The inflation and "X-inefficiency" (see below) studies will enable the Commission to get a more accurate picture of true market performance in the U.S. economy. The energy sector will be a focus of public policy for some years to come. Comprehensive data and analysis of the structure and performance of these industries is required to serve as a basis for sound antitrust policy and for Commission recommendations to the Congress. Program Objectives 1. Analysis of Line of Business (LOB) Survey Information. The LOB form has been developed to give the Commission greatly improved aggregated data on profits, advertising expenditures and R&D expenditures. Industry Analysis staff will use the data to test the basic market structure-performance hypotheses in a more satisfactory manner than has previously been possible. 2. Inflation and Market Structure A study of pricing behavior in concentrated and unconcentrated industries, before, during, and after the recent price controls. 3. Barriers to Entry Study - Au intensive effort to improve the conceptual bases for, and provide evidence on, barriers to new 4. Corporate Patterns Survey The proposed survey covering census year 1972 is designed to be the first of a series of quinquennial 5. Energy Industries - Economists and lawyers are engaged in a major study of the energy industries. Study efforts will focus on the 6. "X-Inefficiency" The most important economic loss to society resulting from monopoly power may well be inefficiently high production costs, rather than the traditional "welfare loss" calculated by economists. The goal of this study is to measure these costs in several important industries. 7. Other Studies This includes a study of the use of market share instability as a measure of market structure and a study of how different accounting practices may affect the comparability of profit rates across industries. FTC-76 |