The Bridgeport evening farmer., 1915-05-10
TOBACCO FIRMS IN COMPETITION,
 PRICE SOARING 6

Washington, May 1o-The su preme courts dissolution of the To- bacco Trust has resulted in compe- tition between the successor com panies. in most branches of the in- dustry, but has not affected wholesale retail prices, and in general such competition has reduced the profits of the other companies.
 That is the conclusion of the old Bureau of Corporations, now merged with the Federal Trade Commission, in the third portion of it's report on F the Tobacco Industry laid today be- fore President Wilson.
 Extensive, and largely technical, the report deals with the prices, costs and profits of the seven companies into which the Federal courts divided i the American Tobacco Company in 1911 after the celebrated dissolution decree.
 The extent of competition between i the seven companies is discussed in . so far as the facts regarding prices, i costs and profits and changes in vol 1 ume and division of business tend to i show it, but not with regard to other important factors because the courts 1 retained Jurisdiction of the case and l the Department of Justice is making | its own investigations into the man | ner in which the dissolution decree l Is being observed. It points out, 1 however, that the seven companies l 1 thus created, were in their respective l branches, much larger than any com | panies not connected with the Com 1 bination." For particular brands says the | report, neither the prices to job l bers nor to consumers show impor- tant changes following the dissolution
 
 | ton as has developed among the suc- 1 cessor companies did not result in 1 price cutting.'' Costs of manufacture since the dis l solution were found distinctly higher 1 because of duplication of effort, and chiefly to advertising. Where the advertising bill for the big combina-
 tion was about $11, 100000 in 1911,
 the seven successor companies spent more than $23,5O0sO0o in 1913 While there was an increase in the volume
 of business the ratio of advertising
 expense to sales doubled between 1910 Il and 1913. The aggregate profits of the successor companies in 1913 were
 2S.7S5.e5S or about $1,230, 900 less than the profits of the combination in 1910, on the basis of an investment II of approximately $25O, 100000.
 Tn view of such high rate of
 profit says the report, ''the question |
 been no competition in prices? The ! answer to this question is partly
 found in the peculiar price making
 conditions in the tobacco trade" 5 Sizes of tobacco packages, the re- f port points out are affected by law ! and it suggests that price competitfon 3 might be facilitated by. amending the
 law to establish a larger number of = sizes of tobacco packages with small l CT difference between them or pro- viding that all kinds of tobacco may
 be packed and stamped in wholesale
 quantities.
 \ Of the so-cal1ed Independent con- , panies, operating apart from the sew en successors to the Trust the report e says few of them have shown increas- ed prosperity since the dissolution.
 'Compared with either the combin-
 ation or the successor companies if
 says, they have, on the whole, made rl an exceedingly poor showing of prof. f it's and since the dissolution this has a been especially marked in navy plug \ and Turkish cigarettes. On the oth- a CT hand in long cut smoking they have
 done much better since the disso1u-
 ton. In scrap tobacco alone hei1
 profits have been greater than the = Combination or successor companies z One of the principal causes of this un-
 favorable profit showing of smaller = companies has been a much higher
 
 The chief explanation is apparently a | found in their small scale operations s and loss efficient organization. The = smaller companies have been at s marked disadvantage with respect tt ,, the cost of dfstribution.''
 l. The decreasing rate of profit of the l. Independents is ascribed to increase
 in selling and advertising. costs since
 the dissolution. The general conclu
 sions of the investigation are thu l. stated in the bureaus report:
 2 -sIn conclusion it may be stated if that the study of prices, costs anc ,-1 profits in the tobacco industry, with : out taking into consideration othe = factors in the competitive situation is indicates that the decree of dissolu e ton has resulted in the successo k companies competing with each oth g CT for business in most branches o ,s the industry, but has not affecte, " wholesale or retail prices. The sue e cessor companies have also competet |. with the smaller tobacco concern l. and, collectively, have won bushes
 from them in some branches am
 lost to them in others. As a conse
 quence of competition the rate o m profit of the successor companies ha r. been reduced, although their rate c r. profit is still high. In general thi Id competition has seriously reduce ,o the profit of the other companies ,e This reduction in profits has nc 5e been caused by increased cost C Id manufacture, but by increased ez ;t penses of distribution, and principal lv. by the increase in expenditures fo v- advertising. As the sale of tobacc s products depends largely on the aG .s vertisement of brands, competition es the tobacco business necessarily in r- creases advertising expenditure I