CHAPTER X.

PRINT PAPER.

In Part I of these lectures, a summary is found of the facts in regard to the greatly increased cost of print paper during the war and the very large excess profits of the paper concerns. According to the Federal Trade Commission, the profits for print paper in 1916 were from 65 per cent to 84 per cent higher than in 1915, and the excess profits of the producers in 1916 as compared with 1915 were $30,000,000.

The situation was regarded as so serious that the Federal Trade Commission recommended to Congress as a war emergency measure that all print paper mills and distributing agencies be taken over by the Government and operated on the government account during the continuance of the war, in order that the governmental agency in charge of the mills should equitably distribute the paper at a fair price. The Federal Trade Commission also called attention of Congress to the fact that the paper trade associations, although ostensibly organized for legitimate purposes, are engaged in practices which destroy competition and defeat the objects of the Sherman Act. In this connection attention was called especially to the association called the Bureau of Statistics Book Paper Manufacturers, which included forty important book making concerns. The Trade Commission held that the activity of this Association has been one of the factors which has led to abnormal increase in prices and presents facts in support of this view.1

In consequence of the report of the Federal Trade Commission suit was brought by the Attorney General against the News Print Manufacturers Association, the so-called paper trust. Eight men and twenty-four companies were indicted for combination and contracts in restraint of trade.

The committee on printing of the Senate on October 6, 1917, submitted a report upon print paper of the Federal Trade Commission to Congress and at the same time introduced a resolution authorizing and directing the Federal Trade Commission to supervise, control, and regulate the production and distribution of print paper and chemical pulp in the United States, and

1 Book-Paper Industry, Senate Document No. 79, 65th Congress, 1st Session, Washington Government Printing Office, 1917.

directing that all mills producing such commodities shall be operated upon government account. The products, according to the terms of the resolution, are to be pooled in the hands of the Federal Trade Commission during the term of the war and equitably distributed at prices based upon the production and cost of distribution, but with a fair profit as determined by the Federal Trade Commission. There are the usual provisions for compensation. This resolution has not as yet been acted upon.

On August 30 the President under his authority to control the price of commodities purchased by the Government (Section 120 of the National Defense Act) fixed the price of print paper for the Official Bulletin at 2 cents a pound. In the meantime the case for the dissolution of the paper combination was pressed in the United States Court, but before it was tried an agreement was reached between the Court and the paper manufacturers. The News Print Manufacturers Association agreed not to defend their case and five members of the executive committee of the Association were fined.

The decree of the court which was accepted by the defendants included among others the following important features:

The eight persons and the twenty-four companies by being members of the News Print Manufacturers Association have entered into unlawful combination in restraint of trade.

The News Print Manufacturers Association is held to be an unlawful combination in restraint of trade and the eight persons and twenty-four companies by becoming members of this Association are held to have acted unlawfully.

Each of the corporate members of the Association was perpetually enjoined in most sweeping terms from cooperating in any way in regard to price of distribution of paper in violation of the antitrust laws.

While the defendants agree to abide by these broad injunctions it is specifically stated that in so doing, they shall not be prevented from entering into an agreement with the Attorney General of the United States as trustee for the operation of the print paper industry during the war.

The agreement made the 26th of November between the Attorney General and the Print Paper Manufacturers, after reciting the reasons for entering into the same, includes the following important provisions:

First: The United States may file a petition in equity to enjoin any operations of the News Print Paper Manufacturers Association and of the manufacturers who are members of that association, in so far as such operations are claimed to constitute a

restraint of trade. In such proceeding the parties of the second part will consent to a decree as prayed for, reserving the right, at the time such consent to a decree is presented to the court, to make such statements, oral or written, not impairing the binding force of the decree as they are advised may be necessary to protect their interests. The petition may also pray for the dissolution of the News Print Manufacturers Association, and if a request be made to that end, the parties of the second part will consent thereto.

Second: The price of news print paper on the basis of 24 by 36 inches in size weighing approximately thirty-two pounds per 500 sheets, on all new contracts from now to January 1, 1918, and on all contracts in existence on January 1, 1918, or made thereafter, and on all sales and deliveries, in the United States, shall not exceed the following amounts:

(a) From January 1, 1918, until April 1, 1918, for such news print paper in rolls, $3 per 100 pounds, free on board at the mill in carload lots, and $3.25 per 100 pounds, free on board at the mill in less than carload lots, and for news print paper in sheets, $3.50 per 100 pounds, free on board at the mill in carload lots, and $3.75 per 100 pounds, free on board at the mill in less than carload lots. The foregoing subdivision (2-a) shall not apply to the Minnesota and Ontario Power Company nor the Fort Frances Pulp and Paper Company, Ltd.; but as to said companies, the Federal Trade Commission, after due hearing and investigation and subject to review as provided in subdivision 2-b, shall fix the just and reasonable maximum prices and terms of contract for said two companies from January 1, 1918, until April 1, 1918, effective January 1, 1918.

(b) After April 1, 1918, the just and reasonable maximum prices and terms of contracts for the sale of all or any news print paper shall be determined and fixed by the Federal Trade Commission, after due hearing and investigation, subject to review by the Circuit Judges of the Second Circuit, who, if of opinion that the prices or terms of contract fixed by the Commission are unjust or unreasonable, shall determine what are just and reasonable. The maximum prices and terms of contract so determined shall continue during the war and for three months thereafter, with the right to any of the parties of the second part or to the Department of Justice to ask the Federal Trade Commission for an investigation and determination of new prices or terms of contract whenever during such periods conditions arise which in the opinion of either make it desirable to ask for any change in price or terms of contract, subject to the same right of review.

In determining the prices to be effective April 1, 1918, the Federal Trade Commission shall consider all pertinent conditions, including those prevailing during the months of January, February and March, 1918, to the end that the prices when announced shall cover the facts as near the time of the effective date of the new prices as is possible.

Third: The parties of the second part, during the life of this agreement, shall offer their news print paper for sale in accordance with paragraph second hereof. In case of sale by written contract said paragraph shall be embodied therein, either wholly or by sufficient reference thereto; but if any customer or any of the parties of the second part, who is offered paper in accordance with the provision of this agreement, prefers to make or retain a contract for a fixed price for a definite period, and any one of the parties of the second part, after duly notifying the Attorney General of his or its intention in the matter, shall make or retain such contract solely in deference to the wishes of the consumer, such agreement so made shall not be construed as a violation of this agreement, even though the price which the consumer pays in furtherance of his own interest is in excess of the prices fixed in this agreement.

Fourth: The parties of the second part agree that to the extent of their power they will cause such of their news print paper as is ordinarily purchased by the so-called small publishers through the intervention of jobbers, dealers, or other middlemen to be delivered to such small publishers at not to exceed reasonable and just prices and terms of sale to be established by the Federal Trade Commission, subject to review by the circuit judges in the manner aforesaid.

Fifth: The party of the first part, or his successor in office, as trustee of an express trust, may bring any appropriate action, suit or proceeding in law or in equity to enforce this agreement on behalf of any person, firm, or corporation injured or damaged by a violation of the terms thereof, and may proceed by preliminary injunction or otherwise to restrain violations of the terms hereof.

This agreement is fully summarized since it involves an entirely new principle in regulation. Heretofore, in case of prosecutions under the Sherman Act, if the defendants are found guilty of certain acts, the Court has enjoined them from doing those things; and in some instances in which the injunctions required complicated procedure with relation to a complex organization, the assistance of the Federal Trade Commission has been secured in reaching an agreement with the convicted companies in

regard to the steps that it will be necessary for them to take in order to meet the orders of the court. Also in various instances, without actually carrying the cases to the court, similar arrangements have been made with the accused corporation by the Attorney General.

However, the agreement above cited goes much further than this. The Attorney General actually fixes the maximum prices for an important commodity, and all of the corporations concerned agree that they shall not charge more than that price. Since the demand is so large this maximum price is in fact that paid. In other words the court in conjunction with the defendants does the most important of the things with which the defendants are charged, that is, fixes prices.

Thus the corporations do the things with consent of the Court which are in violation of the antitrust laws and for which they are fined. The agreements to fix prices antecedent to the action of the Court and with the concurrence of the Court are both clearly in violation of law, for it cannot be held that the Court has the right to change the law.

However, as far as the public is concerned there is the great difference that in the first instance the agreements were made exclusively in the interests of the paper manufacturers; whereas, in the second instance, the agreements were entered into with a representative of the public, and the prices fixed were presumably fair both to the producers and to the consumers.

The price fixed by the Attorney General holds until April 1, 1918. After that date until the end of the war, the Federal Trade Commission is to exercise the authority to fix maximum prices for the Print Paper Manufacturers. The Federal Trade Commission has no such authority as this under the law which creates, it, except the provision which says that it may assist the Court in the dissolution of corporations and make recommendations in regard to procedure concerning them. Thus it appears that the authority which the court has exercised is by it delegated to the Federal Trade Commission without any express enactment. That Congressional action was necessary in order to give this authority to the Federal Trade Commission was clearly the view of the Senate Committee; otherwise there would be no point to the committee resolution to grant authority to the Commission to regulate the print paper industry.

The defense for both of these actions as given by the Court is that it is desirable in the present condition of affairs in the United States that some adjustment of the news print paper be