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THE MUSIC TRADE REVIEW
The New Anti-Trust Legislation—Its Effect on the Music Trade.
Some Features of the Trade Commission Act and The Clayton Act, Passed by Congress That Are of Particular Interest
to the Members of the Music Trade, Set Forth in Interesting Manner by Waldon Fawcett.
At last music trade interests may know the
worst, or the best, according to the way of looking
at it, regarding the anti-trust and trade regulation
legislation with which Congress has been wrestling
for upward of a year past. After months of hear-
ings by Congressional committees, conferences,
caucuses and debate in both Houses of the na-
tional legislature, the law-making body at Wash-
ington has finally passed two bills, which, in the
estimation of President Wilson and the party lead-
ers, fulfil the campaign promises which it has been
announced must be carried out ere big and little
business could be given its long-needed rest.
Music trade interests in both the manufacturing
and merchandising fields have followed the effort
for the securance of anti-trust legislation, and in
some instances vigorous representations have been
made to Washington by firms that felt that their
rights would be unduly curtailed by the proposed
measures just as they would be interfered with in
the conduct of their business should Congress en-
act the Oldfield bill, which is yet pending, but
which seems to have been "put to sleep" for an-
other year. But for all that, the men in the music
trade have kept in touch in a general way with the
situation, and there have been so many changes
and amendments in the bills during their slow
progress through Congress that probably the ex-
act details of the acts as finally placed on the
statute books will come as a surprise to many of
our readers.
New Laws Not So Radical as Expected.
In a general way, and by way of reassurance at
the outset, it may be stated that the new laws in
their effect upon the makers and marketers of
musical instruments and supplies are neither so
radical nor so drastic as were urged by some
politicians and as it was at one time feared by
business men might be put through. The new laws
are bound to influence operations in the music
trade to some extent and may even cause some in-
convenience, but hi the final conferences between
the House and Senate leaders the measures were
shorn of much of menace in the form of heavy
penalties, the promulgation of the idea of "per-
sonal guilt," etc.
Two new laws comprise these fresh mandates
from Congress as to how business may be trans-
acted in the United States. The most important of
these is an act "To supplement existing laws
against unlawful restraints and monopolies, and for
other purposes." This is the measure which has
been commonly referred to in newspaper dispatches
from Washington as the "Clayton bill," although,
as above indicated, it is a very different proposi-
tion from the original Clayton bill which aroused
so much discussion when it was first introduced in
the House of Representatives some months ago.
The other act whereby the sixty-third Congress
has introduced new factors in the business situa-
tion is that "To create a Federal trade commis-
sion, to define its powers and duties." The two
measures are intimately related inasmuch as the
enforcement of the provisions of the Clayton act
will be dependent upon the members of the Federal
trade commission, a new national body that will
bear the same relation to manufacturing, merchan-
dising and kindred interests that the Interstate
Commerce Commission holds to the railroads of
the country.
Sections of Clayton Act Affecting Music Trade.
To go direct to the heart of the new legislation
as it will affect producing and distributing interests
in the music industry, it may be conceded that it is
in sections 2 and 3 of the Clayton act that music
trade men will find those prohibitions, which, if
any, will require them to readjust their methods of
doing business. At that it seems likely that in the
case of these sections, as was true of the Sherman
law, a number of tedious and long-drawn legal
controversies finally culminating in decisions by the
Supreme Court of the United States, will be neces-
sary ere the business world can know the exact
meaning of the new law in application to trade
and commerce.
Where the music trade ia hit hardest by the new
legislation is in the possibility, if not probability,
that there will be interference with the systems ot
exclusive agencies and exclusive selling rights upon
which a large share of the present prosperity of
the piano trade has been built. To be sure, there is
no prohibition in so many words of exclusive
agencies and, on the contrary, persons selling goods
are expressly given the right to select their own
customers, but a ban is placed on the form of
agreements and allowance of preferential prices
which constitute the keystone of the average ex-
clusive agency relation.
Section That Bars Price Discrimination.
Section 2 of the new law is, in full, as follows:
"That it shall be unlawful for any person engaged
in commerce, either directly or indirectly, to dis-
criminate in price between different purchasers of
commodities, which commodities are sold for use,
consumption or resale within the United States or
any territory thereof, or the District of Columbia
or any insular possession or other place under the
jursdiction of the United States, where the effect
of such discrimination may be to substantially
lessen competition or tend to create a monopoly in
any line of commerce. Provided, That nothing
herein contained shall prevent discrimination in
price between purchasers of commodities on ac-
count of differences in the grade, quality or quan-
tity of the commodity sold, or that makes only
due allowance for difference in the cost of selling
or transportation, or discrimination in price in the
same or different communities made in good faith
to meet competition. And provided further, That
nothing herein contained shall prevent persons en-
gaged in selling goods, wares or merchandise in
commerce from selecting their own customers in
bona fide transactions and not in restraint of
trade."
Presents Some Interesting Problems.
Scrutinizing this section closely it looks, on the
face of it, as though if a piano manufacturer al-
lowed special prices to an exclusive agent or sole
representative in a locality, a strict interpretation
of this law might construe that any exclusive
agency would "tend to create a monopoly." But,
on the other hand, if musical instruments are to be
retailed at a standardized price fixed by the manu-
facturer it is a question whether the handling of
the line by an exclusive agent would really "sub-
stantially lessen competition" as compared with the
stocking of the line by a number of retail estab-
lishments. It looks as though it would become a
question whether the letter or the spirit of this
new law will be enforced, and if the latter it may
be a conundrum just what is the spirit of the law.
The first proviso in Section 2 finds significance
for the music trade in that it formally sanctions
quantity discounts—something that in the early
clays of the discussion it was thought, in some
quarters, might be specifically prohibited by this
very law. Furthermore, it affords what would ap-
pear to the layman to be a loophole for the manu-
facturer who desires to favor one dealer or agent
in a community—possibly because, as is so often
the case, that particular dealer or agent did the
"missionary work" necessary to place the product
before the people of his community. The sup-
posed loophole is found in the reservation that
permits discriminations in price that allow "for
difference in the cost of selling." That would seem
to mean that whereas a manufacturer must sell at
the same list price to all the dealers to whom he
elects to sell in a given community, there is nothing
to prevent him making concessions for unusual sell-
ing expenses, such as extra advertising, electric
signs, etc., etc.—all aids which a chosen agent
could well afford to employ if they enabled him to
secure special price concessions.
Probable Effect of Law on Sales.
How will the prohibitions of this new law affect
the sale of musical instruments at retail? Pre-
sumably, of course, there can be no effect what-
ever on sellers who uphold fixed standardized
prices, whereas dealers who upon occasion wish to
shave prices can get around the law by either of
two routes. First, there is the allowance above
noted, "for difference in the cost of selling." This
in itself would permit concessions to the customer
who pays cash or to the prospect who comes to
the store voluntarily instead of having required thie
solicitation of an outside salesman. Secondly,
there is the sanction of price discriminations macle
"to meet competition." That would seem to be
elastic enough to admit of almost anything. It is
the "joker" of the present act, and it shatters the
hopes of those men in the music trades who fig-
ured that the Clayton act might not be without
compensations to the trade if it put a curb on the
"was—now" type of piano merchant.
',
Hits Exclusive Agency Agreements. s»
Section 3 of the Clayton act, as finally passed, is
seemingly aimed at another trade practice which js
often employed to make binding exclusive agency
agreements. This section is, in full, as follows:
"That it shall be unlawful for any person engaged
in commerce, in the course of such commerce, t<>
lease or make a sale or contract for sale of goodsj,
wares, merchandise, machinery, supplies or other
commodities, whether patented or unpatented, for
use, consumption or resale within the United States
or any territory thereof or the District of Colum-
bia or any insular possession or other place unde^
the jurisdiction of the United States, or fix a pric£
charged therefor, or discount from, or rebate uponj,
such price on the condition, agreement or under'
standing that the lessee or purchaser thereof shall
not use or deal in the goods, wares, merchandise^
machinery, supplies or other commodities of a
competitor or competitors of the lessor or seller,
where the effect of such lease, sale or contract
for sale, or such condition, agreement or undef-
standing may be to substantially lessen competition
or tend to create a monopoly in any line of conv
merce."
>;
To "the man on the street" it would appear tha|t
if any manufacturer of musical instruments desire^
to grant an exclusive agency on the understanding!
that the agent should not handle any rival line it
will be up to that manufacturer to prove that such
an arrangement cannot lessen competition o^
create a monopoly. However, it is admitted iri
official circles that the object of this section is
not so much to break up existing relations between
manufacturers and distributers as to establish all
untrammeled condition between retailers and
ultimate consumers. Indeed, the section found its
inspiration in that decision of the United States
Supreme Court in the Dick-Henry mimeograph.
case, which sanctioned the very practice which this
new law now prohibits. One effect, supposedly, of
this act in the retail music trade will be to render
it impracticable for merchants to sell piano players,
talking machines, etc., with any restrictions to the
effect that there may not be used in conjunction
therewith the perforated rolls, records, needles, or
accessories put out by rival firms. In other words,
manufacturers must rely upon moral suasion and
not upon patent licenses or other similar agree-
ments if they would control the supply trade.
Provides for Threefold Damages.
''
In Section 4 of the now law it is provided that|
any person who is injured in his business or propTj
erty by reason of anything forbidden in the anti-;
trust laws may sue and shall recover threefold:
damages and the cost of the suit. Employers of
labor in the music trade may be interested in Sec-
tion 6, which exempts from the operation of the
anti-trust laws labor organizations not having cap-
{Continucd on page 7.)