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82 IN RESTRAINT OF TRADEdevelopments discussed earlier and the unrestrained, aggressive practices ofone's competitors reinforced business understanding of the proposition laterput forth by Mancur Olson: that the competitive self-interests of individualfirms will work to the detriment of the collective interests of the industryitself "unless there is coercion
. .
o make individuals act in their commoninterest." The centralizing demands of'the new industrial order that hadbeen impressing its character upon American society caused many businessleaders to begin experimenting with various political formulas to reorientthe perspectives of businessmen.One of the initial efforts of trade associations to obtain some degree ofgovernment approval and enforcement of codes of business practices involvedthe "trade practice conferences" established and conducted by the FederalTrade Commission. The
FTC
had frequently received complaints from in-dustry members concerning trade practices that were so pervasive withinparticular industries that it would have been fruitless to attempt to deal withthem on the basis of formal proceedings against each firm engaging in thepractices. Consequently, as early as 1919 the FTC began inviting membersof specific industries to participate in conferences designed to identify tradepractices that were felt by "the practically unanimous opinion" of industrymembers to be unfair. As already noted, individual firms were unwilling toadhere to more passive trade standards, not only for the self-interest motiva-tions mentioned byMancur Olson but for the correlative reason that theyknew their competitors would also deviate from agreed rules. While the ear-liest conferences were initiated by the
FTC
itself and were without any spe-cific statutory authorization, it did not take long for trade associations andindustry members to see in such machinery an effective method for the en-forcement of those rules which, it was hoped, would stabilize the conditionsso many had found so intolerable. The conference procedure was, apart fromthe enforcement offered by the FTC, rather close in concept to the tradeassociation "codes ofethics," making it a readily acceptable political alter-native to the more disappointing voluntary efforts. As a result, the tradepractice conferences received the active support of the
U.S.
Chamber of Com-merce and other trade groups throughout the 1920s and up into 1931when,as a consequence of the FTC suddenly reducing the scope of trade practicerules, many within the business community began actively promoting alter-native programs, some of which were to ultimately become part of the NewDeal's National Industrial Recovery Act.14The basic procedure governing a trade practice conference involved the
 
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POLITICAL ALTERNATIVES
83
FTC inviting the members of a specific industry to attend a conference, atwhich a discussion of trade practice problems and proposed solutions wouldtake place under the general supervision-though not the direction-of
a
representative (ordinarily a commissioner) of the FTC. Complaints regard-ing existing conditions and proposed rules to deal with such conditions camefrom industry members themselves, with the commission playing a role moreakin to that of a moderator than that of an ultimate authority. Industrymembers were then invited to express themselves as to the fairness or unfair-ness of specific trade practices. In the words of the FTC, "If the practicallyunanimous opinion of the representatives of the industry condemns a givenpractice
. .
.
[it] is given great weight by the Commission in considering suchpractices."ls It must be emphasized that such industry expressions did notobligate the FTC to follow any of the recommendations made at the confer-ence. Though such expressions were purely "advisory" in nature, it is alsocorrect to point out that, to the degree they represented a consensus of opin-ion within the industry, they tended to have a great deal of influence with theFTC as statements of the "common law" for that industry. The commission'sattitude toward such declarations was stated rather succinctly: "The effect isthat the weight of opinion of the industry has been communicated to theCommission and that thereafter the Commission will feel it to be its duty incase complaints are made to it of a continuance of the condemned practiceson the part of any member of the industry, to issue its formal complaint.
.
"I6
It is understandable, then, that the business community saw in the tradepractice conferences a greater potential for the enforcement of industry stan-dards than what had existed in the trade association-formulated codes ofethics. Despite the commission's having acknowledged that the enforceabil-ity of rules emanating from such conferences would ultimately be subject tojudicial review, any experienced legal counsel could give adequate assuranceto his clients-at least at this point in time -that the courts would tend togive a stamp of prima facie "reasonableness" to rules that represented thenearly unanimous thinking of industry members who had participated in theformulation of such rules under the auspices of the FTC.The rules that came out of the conferences and were approved by the
FTC
fell into two categories: Group
I
rules and Group
I1
rules. Group I ruleswere considered by the commission as expressions of the prevailing law forthe industry developing them, and a violation of such rules by any member
of
that industry-whether that member had agreed to the rules or not-would subject the offender to prosecution under Section
5
of the FederalTrade Commission Act as an "unfair method of competition."17 Although anumber of business leaders and trade association executives were fond ofspeaking of the "voluntary" nature of the trade practice conferences, therewas no question as to the binding nature of Group I rules on all members of
 
84
IN RESTRAINT OF TRADEa given industry, regardless of whether a particular firm had ever "voluntar-ily" chosen to be bound by such rules. As one chairman of the FTC put it,"[Tlhe Commission undertakes to enforce compliance [with Group
I
rules]by proceeding against all violators, whether they have subscribed thereto ornot.
. .
"I8
Contained within Group
I
were rules that dealt with practices consid-ered by most business organizations to be the more "disruptive" of stableeconomic conditions. Generally included were prohibitions against inducing"breach of contract;
.
.
enticement of employees;
. .
espionage;
.
. .
dispar-agement of competitors;
.
. .
commercial bribery;
.
.
price discrimination bysecret rebates, excessive adjustments, or unearned discounts;
.
.
.
selling ofgoods below cost or below published list of prices for purpose of injuringcompetitor; misrepresentation of goods;
.
.
use of inferior materials or de-viation from standards; [and] falsification of weights, tests, or certificates ofmanufa~ture."'~ hile some of these rules involved efforts to restrain fraudu-lent practices that would harm consumers, most were clearly directed to-ward competitive practices that, it was feared, would have a harmful effectupon the competitors of firms employing such methods.Group I1 rules, on the other hand, dealt with practices that the courts orthe FTC had not generally held to be unlawful per se. They usually werepractices that were objectionable to members of a specific industry but werenot universally regarded as "unfair methods of competition" within themeaning of the Federal Trade Commission Act. Even though the FTC con-sidered the violation of a Group I1 rule to be an unfair method of competi-tion, this class of rules was considered binding only upon the firms that hadactually agreed to them, a fact that prompted FTC chairman Abram
F.
Myersto observe that the absence of enforcement against nonsigners was "a seri-ous stumbling block" to business efforts on behalf of self-regulation.'OThe basic content of trade practice conference rules, whether of the Group
I
or Group I1 variety, did not generally differ from the trade associationcodes of ethics. What did differ, of course, was that the FTC now afforded ameans for the enforcement of such rules, with the categorization of rulesinto either Group I or Group I1 determining how and against whom suchrules would be enforced. To illustrate the point, a trade practice submittal ofthe National Petroleum Marketers Association, adopted in 1920, containeda provision outlawing cash discounts and secret rebatesa21 he trade practicerules for the oil industry, adopted the same year, provided for uniform agencyand tank rental agreements, with minimum rental rates established. Cashdiscounts were also prohibited. The 1928 rules for the petroleum industry inVirginia required, as a Group I rule, the posting of and adherence to sellingprices, along with the prohibition of any discounts, while the Group
I1
rulessought to discourage the direct sale of petroleum from bulk plants into the
of 00

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