Approved Code No. 466-Amendment No.1 Registry No. 1615-30 

NATIONAL RECOVERY ADMINISTRATION 

AMENDMENT TO 

CODE OF FAIR COMPETITION 

FOR THE 

RETAIL TOBACCO TRADE 

AS APPROVED ON APRIL 23, 1935 

WE DO OUR PART 

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U.l. Dlfi<I*TOIW' ! ' 

UNITED STATES 

GOY.ERNMENT PRINTING OFFICE 

WASHINGTON: 1935 

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Approved Code No. 466-Amendment No. 1 

AMENDMENT TO CODE OF FAIR COMPETITION 

FOR THE 

RETAIL TOBACCO TRADE 

As Approved on April 23, 1935 

ORDER 

APPROVING AMENDMENT OF ConE OF FAIR Co!\IPETITION FOR THE 

RETAIL ToBAcco TRADE 

An application having been duly made pursuant to and in full 

compliance with the provisions of Title I of the National Industrial 

Recovery Act, approved June 16, 1933, for the approval of an 

amendment to the Code of Fair Competition for the Retail Tobacco 

Trade, and hearings having been held thereon and the annexed 

.report on said amendment, containing findings with respect thereto, 

having been made and directed to the President: 

NOW, THEREFORE, on behalf of the President of the United 

States, the National Industrial Recovery Board, pursuant to authority vested in it by Executive Orders of the President, including 

Executive Order Number 6859, dated September 27, 1934, and otherwise, does hereby incorporate by reference said annexed report and 

does find that said amendment and the Code as constituted after 

being amended comply in all respects with the pertinent provisions 

and will promote the policy and purposes of said Title of said Act 

and does hereby order that said amendment be and it is hereby 

approved, and that the previous approval of said code is hereby 

modified to include an approval of said code in its entirety as 

amended. 

NATIONAL INDUSTRIAL RECOVERY BOARD, 

By W. A. HARRIMAN, Administrative Officer. 

Approval recommended: 

ARMIN ,v. RILEY' 

Division Ad1ninistrator. 

wASHINGTON, D. c., 

April ~3, 1935. 

131777°----1749-59----35 (1) 
REPORT TO THE PRESIDENT 

The PRESIDENT, 

The White House. 

Srn: The Code Authority for the Retail Tobacco Trade has requested that the Code of Fair Competition for said trade be amended 

by striking out Sections 1 and 2, Part II of Article VI and sub- stituting in their place two new Sections. 

The Sections of the Code which are being removed provide that 

willfully destructive price cutting is an unfair method of competition and is forbidden. Furthermore, they provide that in cases of 

emergency a basis for computing minimum prices on the products 

affected may be e tablished upon the recommendation of the Code 

Authority with the approval of the National Recovery Administration. 

The proposed amendment declares it to be an unfair trade practice and forbids the selling of tobacco products at less than merchandise cost. Furthermore, it defines merchandise cost of cigarettes 

to be the manufacturer's list price less 9.1% and the merchandise 

cost of other tobacco products to be the manufacturer's list price 

less 7.1 %. In addition, the proposal states that an allowance for the 

cost of retail distribution, or any part thereof, may be recommended 

by the Code Authority and may be fixed by the National Industrial 

Recovery Board. I:f such an allowance is fixed, no member o:f the 

trade may sell at a price which does not include such allowance. 

This amendment has arisen from the fact that for a considerable 

period of time tobacco products have been used as "loss leaders", 

such use occurTing primarily in those establishments whose principal 

line of business consists in the selling of merchandise other than 

tobacco products. This practice resulted in destructive price cutting 

among members of the trade and on July 12·, 1934, an emergency was 

declared to exist in the selling of cigarettes at retail. At that time, 

an Administrative Order was approved which fixed the basis :for 

the computation of minimum retail cigarette prices. Said Order 

be"ame effective on July 16, 1934, for a ninety day period. At the 

end of that time, it was found that the causes leading to the emergency had not been removed and the Order has subsequently been 

extended from time to time and is now due to terminate on April 

30, 1935. . A study of this situation has revealed that the causes of this 

emergency do not yield to treatment on an emergency basis and are 

perhaps of a more permanent nature than was originally believed 

to be the case. Consequently, in view o:f the fact that the emergency 

Order has had a very beneficial effect upon the Retail Tobacco Trade 

as a whole, and particularly upon small enterprises engaged in the 

distribution of cigarettes, the Code Authority has deemed it necessary to so amend the Code that the principles o:f said emergency 

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Order and its effects may be continued. The Code Authority also 

finds that tobacco products other than cigarettes have been used 

extensively as "loss leaders" and consequently, the proposed amendment includes all tobacco products rather than cigarettes only. 

The Deputy Administrator in his final report to the National Industrial Recovery Board on said amendment of said Code having 

found as herein set forth and on the behalf of all proceedingf' in this 

matter: 

The National Industrial Recovery Board finds that: 

(a) The Amendment of said Code and the Code as amended are 

well designed to promote the policies and purposes of Title I of the 

National Industrial Recovery Act, including the removal of obstructions to the free flow of interstate and foreign commerce which tend 

to diminish the amount thereof, and will provide for the general 

welfare by promoting the organization of industry for the purpose 

of cooperative action among trade groups, by inducing and maintaining united action of labor and management under adequate governmental sanction and supervision, by eliminating unfair competitive· 

practices, by promoting the fullest possible utilization of the present productive capacity of industries, by avoiding undue restriction 

of production (except as may be temporarily required), by increasing 

the consumption of industrial and agricultural products through 

increasing purchasing power, by reducing and relieving unemployment) by improving standards of labor, and by otherwise rehabilitating industry. 

(b) The Code as amended complies in all respects with the pertinent provisions of said Title of said Act, including without limitation 

subsection (a) of Section 3, subsection (a) of Section 7 and subsection (b) of Section 10 thereof. · 

(c) The Code empowers the Code Authority for the Retail Tobacco 

Trade to present the aforesaid amendment on behalf of the trade 

as a whole. 

(d) The amendment and the Code as amended are not designed 

to and will not permit monopolies or monopolistic practices. 

(e) The amendment and the Code as amended are not designed 

to and will not eliminate or oppress small enterprises and will not 

operate to discrimin~te against them. 

(f) Those engaged in other steps of the economic process have not 

been deprived of the right to be heard prior to approval of said 

amendment. 

(g) The "loss leader" practice sought to be removed by the proposed amendment results either in efforts by the tobacconist to make 

up the loss by charging more than a reasonable profit for other 

articles, or in driving the small tobacconist with little eapital out of 

legitimate business. It works back against the tobacco grower, and 

the labor which he employs. 

For these reasons the amendment has been approved. 

For the National Industrial Recovery Board: 

APRIL 23, 1935. 

w. A. HARRIMAN' 

Administrative Officer. 
AMEND~1ENT TO CODE OF FAIR C01v1PETITION FOR 

THE RETAIL TOBACCO TRADE 

Amend Part II of Article VI of the Cocle of Fair Competition for 

the Retail Tobacco Trade by striking out Sections 1 and 2 thereof 

and substituting therefor the following: 

SECTION 1. Loss Lindtation Provision: 111 erchandise 0 ost.-It is 

hereby declared to be an unfair trade practice, and it is hereby forbidden, to sell tobacco products, which at the time may be subject 

to the pro' isions of this Part II, at le s than merchandise cost. 

(a) Any sale of cigarettes at a price which is below the manufac-

. turer's list price les nine and one tenth percent (9.1%), and any sale 

of other tobacco products, at a price which is below the manufacturer's list price less seven and one tenth percent (7.1%), shall be 

deemed to be a sale below merchandi e cost. Any change by the 

manufacturer in the discount from his list price occurring after the 

effective date of this provi ion shall be translated into an equivalent 

change of his list price and all calculations above referred to shall 

be based on such equivalent list price. 

(b) From time to time, the Code Authority may recommend review 

and recon ideration, or the National Industrial Recovery Board may 

cause this provision to be reviewed or reconsidered and appropriate 

action taken. 

SECTION. 2. Loss Li1nitation Provision: Distribution Oosts.- An 

allowance for costs of retail distribution, or any part thereof, may be 

recommended by the Code Authority, and may be fixed by the National Industrial Recovery Board, and thereafter no member of the 

trade shall sell at a price which does not include such allowance for 

costs of retail distribution so fixed. From time to time, the Code Authority may recommend review and reconsideration, or the National 

Industrial Recovery Board may cause any determination hereunder 

to be reviewed or reconsidered and appropriate action taken. 

Approved Code No. 466-Amendment No. 1. 

Registry No. 1615-30. 

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