I.—13a

Existing Law on the Subject. The right to combine in defence of, or in support of, trade interests is recognized just as is the right of a man to contract with whomsoever he pleases. Some forty years ago Lord Justice Bowen said in the course of a judgment, If peaceable and honest combinations of capital for purposes of trade competition are to be struck at, it must, I think, be by legislation, for Ido not see that they are under the ban of the common law." The law remains the same to-day. It cannot be doubted that there has been a tendency for combines or combinations to increase in number and in importance. This tendency may be attributed partly to an effort on the part of manufacturers of some classes of goods to deal with price-cutting, an individual manufacturer is not in a strong position in this respect, whilst a combination of manufacturers of a particular class of goods may be very powerful and able to secure its object to a large extent by withholding supplies of goods from retailers who do not conform to conditions imposed, or from wholesalers who supply such retailers. If the real purpose of the combination is not to injure another, but to forward or defend the trade of those who enter into it, then no wrong is committed, and no action will lie, although damage to another ensues, provided that the purpose is not effected by illegal means. To put it in another way, there is nothing illegal in an agreement by a number of manufacturers to the effect that they will only supply goods to a trader who observes conditions which they think right to make part of the bargain of sale of such goods. Extent of the Practice of Resale Price Maintenance. We found that the imposition of conditions upon retailers and wholesalers regarding the resale prices to be charged is a widespread and growing practice among'manufacturers. In general, the goods which are thus price-maintained belong to the class of branded goods which are distinguished by bearing the manufacturer's proprietary label or trade-mark. Not all branded goods are, however, price-maintained, and we were informed that of the goods stocked, for example, by an ordinary grocer, one-sixth might be branded goods not subject to price-restrictions, one-third price-maintained branded goods, and the other half non-branded goods, including bulk goods not regulated by the supplier in regard to retail prices. Reasons for Adoption of System of Price-maintenance. The evidence placed before us shows that the system of price-maintenance was adopted to prevent what the manufacturers of branded goods, and to a great extent also the wholesale and retail distributors, regarded as serious evils resulting from advertised branded goods being sold at free prices. Effects of Price-cutting on Retailers and Manufacturers. The effects of direct price-cutting upon the trade of retailers in the immediate neighbourhood of the cutter are obvious. The possibility of harmful reactions upon the individual manufacturer is little less evident. Where a particular shop cuts the price of an advertised branded article, neighbouring shops can only sell the article if they do likewise. If the price is cut to a point which yields little or no profit to the retailer, he either ceases to stock the article, or if he is compelled to stock it in order to meet the insistent demands of his customers, he at any rate refrains from displaying it and endeavours to push the sale of some other article yielding a larger margin of profit. The manufacturer finds that his sales fall off. In the end the price-cutters, finding that the article is less effective as a bait than it was formerly, decide to resort to something else for that purpose. The net effect is that the price-cutter has succeeded in diverting to himself a more or less substantial part of the value of the advertising done by the manufacturer. Many of those who furnished written or oral evidence to us laid stress upon the significance of this feature ; and undoubtedly it has played an important, if not the most important, part in the development of the price-fixing movement. We were impressed by the volume and unanimity of the evidence relating to this matter. There can, we think, be little doubt that the effects of price-cutting have been severely felt by manufacturers, and retailers alike. These effects have shown themselves in a large number of trades, and the evidence as to the experience of all trades concerned was in substance the same. There can, in our view, be no doubt whatever that the system of price-maintenance, which has grown up independently in a number of trades, is aimed principally at the elimination of the effects in question, and to regard the system as one direct primarily, or indeed to any real extent, to the imposition of excessive prices upon the public is in general to view it from the wrong angle. Differences in the Application of the System of Price-maintenance. The resale price maintained by the suppliers of branded goods is usually a minimum price which sellers are not allowed to undercut. Occasionally it is a definite price which may be neither undercut nor exceeded. Method of Enforcement. To enforce the observance of retail prices fixed by him, the manufacturer does not, as a rule, rely upon legal remedies. . As a general rule, and in so far as he really tries to enforce the maintenance of his prescribed prices, he does so first by persuasion, second by threat of withholding supplies, and third by the actual withholding of supplies. Trade Associations. The difficulties encountered by individual manufacturers seeking to maintain resale prices has led in a number of trades to the formation of associations for the purpose of detecting and putting a stop to price-cutting. The Grocers' Proprietary Articles Association was formed in 1923. Occasionally, as in the case of the Grocers' Proprietary Articles Association, only the particular manufacturer whose prices are cut may be required to withhold supplies. The Proprietary Articles Trade Association. The essence of the Proprietary Articles Trade Association plan for dealing with cutting is that if the fixed minimum prices of a single manufacturer are cut all manufacturers (and also wholesalers where prices are cut by a retailer) undertake to withhold supplies of all listed goods. Effect of the System of Price-maintenance. Before proceeding to discuss the public interest in relation to the trade practices which we have investigated we propose to consider broadly the effect of the system upon the position and inter-relation of the manufacturer, the distributor, and the consumer. Position of the Manufacturer. Under the price-fixing system, as under conditions of unregulated resale prices, the manufacturer sells his goods in more or less free competition with other manufacturers to the wholesale or retail trader. If he has a popular trade-mark or has spent large sums in advertising, so that his goods pass easily and quickly into consumption, he may expect to obtain a better price than otherwise, or to dispose of a larger quantity. In any case he must, under conditions of price-maintenance, charge a price uniform to all, subject perhaps to discounts e.g., for sales in quantity, for cash payment, or for window displays made by the retailers.

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