Bisbee daily review., 1915-05-13
COMPETITION IS THE RESULT OF TOBACCO
 TRUST DISSOLUTION
At Least so Says the Federal Trade Commission Which has Investigated the Effects Court Action has Had.


 in most branches of the industry, but has not affected wholesale or retail prices, and in general such competi. tion 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 the Tobacco Industry laid today be- fore President Wilson.
 Extensive and largely technical, the report deals with prices, costs and profits of the seven companies into which the federal courts divided the American Tobacco Company in 1911 after the celebrated dissolution decree.
 The extent of competition between the seven companies is discussed iE go far as the facts regarding prices, costs and profits and changes in vol tune and division of business tend tl show it, but not with regard to other | important factors because the court. retained jurisdiction of the case anC the Department of Justice is making it's own Investigations into the man ner in which the dissolution deere is being observed. It points out. how ever, that the seven companies thu | created. were in their respective branches, much larger than any con pauies not connected with the "Com bination."
 For particular brands" says tho report neither the prices to jobber. nor to consumers show importau changes following the dissolution the Combination Such competition as has developed among the successor companies did not result in price cut tins"
 Costs Of manufacture since the dis solution were found distinctly highef because of duplication of effort. and chiefly. to advertising. Where the advertising for the big corporation was about Sl1 10O0,O0O in 1911. the | seven successor companies spent more than S23.5OOOO0 in 1915 While there was an increase in the volume of business, the ratio of advertisinf expense to sales doubled betweeI 1910 and 1913. The aggregate profu of the succesAr companies in 1gl, were 29,735.95S, or about S1.23O.OO0 less thas the profits Of the combina ton in 1910, on the basis of an invest ment of approximately S250.OO0,O00
 In view of such high ratio O profit" says the report "the question naturally arises Why has there beer no competition in prices?' The an- swer 10 this question is partly found in the peculiar price making condi- tions in the tobacco trade"
 Sizes of tobacco packages. the re- port points out. are affected by law and it suggests that price competition might be facilitated by amending the law to establish a larger number or sizes of tobacco packages with small CT difference between them or provid- ing that all kinds of tobacco may be packed and stamped in wholesale quantities.
 Of the so-called Independent com panies, operating apart from the sev- en successors to the Trust the report says few of them have shown increas- cd prosperity since the dissolution
 Compared with either the combi- nation or the successor companies" 1t says. they have, on the whole. made an exceedingly poor showing of profits and since the dissolution this has been especially marked in navy plug and Turkish cigarettes. On the other hand in long cut smoking, they have done much better since the dis solution. In scrap tobacco alone their profits have been greater than the combination or successor companies. One of the principal causes Of this un- favorable profit showing of smaller companies has been a much higher ration of manufacturing costs to sales. The cheif explanation is apparently found in their small scale of operation and less efficient organization The smaller companies have been at a marked disadvantage with respect 10 the cost of distribution"
 The decreasing rate of profit of the Independents is ascribed to increases lin selling and advertising costs since the dissolution The general conclu- sions of the investigation are thus stated in the bureaus report
 "In conclusion it may be stated that the study of prices. costs. and profits in the tobacco industry without talk ing into consideration other factors in the competitive situation, indicates that the decrec of dissolution has re- suited Is the successor companies' competing with each other for busi- mess in most branches of the industry but has not affected wholesale or re- iail prices. The successor companies have also competed with the smaller .fohacco coneens and. collectively, have won business from them in some branches and lost Co them in others. As a consequence of competition the rate Of profit of the successor companA es has been reduced although theii rate of profit is still high In general this competition has seriously reduced Che profits of the other companies
 This reduction i'm profits has not been caused by increased cost of man uiactufe but by increased expenscs