SENATE RESOLUTION NO. 125. REPORTED BY MR. FLETCHER. IN THE SENATE OF THE UNITED STATES, September 11, 1917. Resolved, That the report submitted by the Federal Trade Com mission on July 26, 1917, entitled "Prices of American Flags," in response to a resolution of the Senate of April 16, 1917, be printed as a Senate document. Attest: JAMES M. BAKER, Secretary. LETTER OF TRANSMITTAL. FEDERAL TRADE COMMISSION, SIR: By direction of the Commission, I am transmitting herewith, pursuant to a resolution of the Senate of April 16, 1917 (S. Res. No. 35, 65th Cong., 1st sess.-Senator Pomerene), a report of the Federal Trade Commission on the prices of American flags. Very respectfully, Washington, D. C. The PRESIDENT OF THE SENATE, REPORT ON THE PRICES OF AMERICAN FLAGS. We have the honor to transmit herewith the report of the Federal Trade Commission on the prices of American flags. This report is in pursuance to resolution of the Senate (S. Res. No. 35, 65th Cong., 1st sess.). This report deals with conditions in the manufacture and distribution of American flags, and of the materials of which made. The prices of American flags charged by leading manufacturers have been increased 100 to 150 per cent since April, 1916. Scores of others, not regularly engaged in the manufacture of flags but who are now so engaged, have secured during April and May, 1917, prices ranging from 100 to 500 per cent higher than the prices current in April, 1916. On high-grade display flags the gross profits of the regularly established flag manufacturers on new business done in April and May, 1917, have been 75 to 100 per cent, based on the average cost. New flag-making establishments for the same period have made from 100 to 200 per cent gross profits. Flags are sold generally by manufacturers direct to retailers, and these, of whom many have themselves paid excessive prices to the manufacturers, have secured from the public prices 100 to 300 per cent higher than prevailing retail prices of a year ago. The total amount of money spent for flags at normal prices is about $5,000,000 each year. Of this amount probably not more than $500,000 has represented the gross profits to manufacturers. But in view of the recent great increase in demand and volume of sales at abnormally high prices the total profits received by manufacturers are not less than 10 times the amount secured during 1916. For example, the price received by the manufacturer for a 5 by 8 wool bunting flag a year ago was about $2.75. But during April and May, 1917, prices as high as $10 were frequently charged by manufacturers for a flag of similar specifications. Such a price represents an average profit of more than 100 per cent over cost of production. The cost to flag manufacturers of wool and cotton flag bunting has not been greatly increased since February 1, 1917, since which time the great increase in demand for flags occurred. Since April 1, 1916, the average cost of making flags, including cost of materials, has increased less than 50 per cent, while the average margin of gross profit to the manufacturers on new business has increased more than 500 per cent. Many of the older established flag manufacturers had not prior to May 1, 1917, benefited greatly by the advanced prices, because of old orders filled at former lower prices. The greatest advantage of the sudden unprecedented demand for flags has been taken by the new establishments which have recently engaged in flag making because of the prospect offered of excessive profits. Some retail dealers also have charged prices representing a gross profit on costs of as much as 400 per cent. Many other retailers, however, have secured only reasonable profits, and some few sales have apparently been made at a net loss. An association has been in existence for some years among flag makers controlling the major portion of the flag production. Prior to 1915 there was among members of the association an agreement fixing the prices at which wool flags were sold. Because of the unprecedented demand and runaway market, there has been no successful price fixing by this association or its membership recently, but attempts have recently been made to fix a new standard basis list at 100 per cent above the old price list as a means of preventing prices from declining when the supply again overtakes the demand. The Commission has ordered proceedings commenced against said association to prevent the continuance of its illegal activities. The Commission finds that the present price situation in the flag industry is primarily due to the sudden unprecedented popular demand for flags occasioned by reason of the country's entrance into the war. This sudden increased demand for flags has so far exceeded the supply that competition in the sale of flags is virtually suspended. The Commission further finds that the activities of the present and former members of the association as above mentioned have been largely responsible for price fixing in the flag industry and have also contributed to the present abnormal high-price situation. The record of these past activities has been called to the attention of the Department of Justice. This demand and price situation existing as to flags is typical of a condition caused by the war. Unlawful agencies and acts contemplated by the antitrust laws are not necessary to bring about hardship to the public and the industries of the Nation. The public and the industries are not protected against sudden, unreasonable, and extortionate prices. Competition in selling has been practically suspended, and prices are made not merely to yield fair and generous profits based on producing and distributing costs, but are sent to an indefensibly high level made possible by the great demand and with only normal supply. The Commission suggests consideration by Congress of immediate legislation adequate to afford prompt relief generally to the public and dependent industries in war times against unreasonable prices, not only when such prices result from unlawful agencies, but also where they arise merely out of abnormal conditions in which an abandonment of the public to an unchecked working of supply and demand must result in extreme hardship and inequity. Respectfully submitted. WM. J. HARRIS. |