Document NB42Bq3VBQaYm8wqeekY87DV

[149] A PLAINTIFF'S EXHIBIT TN-577S UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA VS. JOHNS-MANVILLE CORPORATION, KEASBEY AND MATTISON"COMPANY, ROBERT F. ORTH, LOUIS F. FRAZZA, ROBERT R. PORTER, NORMAN L. BARR, and JAMES R. REICHEL, CRIMINAL NO. 21118 Defendants. MEMORANDUM BRIEF ON IDENTICAL PRICING I. Introduction: During the course of this case there has been frequent reference to the subject of Identical pricing. Without attempting to discuss or argue the facts presented in the instant case, we think it would be helpful to make available to the Court at this time some of the leading authorities on the subject of identical prices and the Doctrine so frequently referred to as "conscious parallelism". These are discussed in the pages that follow. We also wish to call to the Court's attention at this time a very thorough analysis of the practical problem that the businessman faces in respect of identical pricing, particularly in a situation where there are only two or three producers of a homogeneous or substantially interchangeable product. We refer to a recent article appearing in The Harvard Business Review by Professor Paul W. Cook, Jr. entitled "Facts and Fancy on Identical Bids". A reprint of this article is attached as an exhibit to this Memorandum Brief. 0025-1185 [150] -2- II. Conscious parallelism is insufficient to support a finding of illegality. General uniformity in business practices throughout an industry has long been recognized as valid: The Second Circuit in Federal Broadcasting System, Inc, v. American Broadcasting Company, 167 F. 2d 349, Cert, denied 335 U.S. 821, stated: "We cannot say that such similarity results from anything more than common business solutions to identical problems in a competitive industry". (at 352) The same thought was expressed as follows in United States v. Twentieth Century Fox Film Corp., 137 F. Supp. 78 (S.D. Cal. 1956): "The act of each, no matter how independently taken, may have a striking similarity, for the very obvious reason that the measures taken are the only ones which commend themselves in the circumstances." (at 93) In this circuit, the most recent case clearly upholding the point in terms of uniform refusal to deal is Delaware Valley Marine Supply Company v. American Tobacco Company, 297 F. 2d 199 (1961). There, plaintiff's main argument was that all the defendants (the five major cigarette companies) had refused to do business with him. The Court, in affirming a judgment for defendants, cited Theatre Enterprises, Inc, v. Paramount Film Distributing Corp., 346 U.S. 547 at 541; 74 S. Ct. 257; 981 Ed. 273 (1954) and then went on to state: "The situation at bar was not of a sort which allowed much scope of action to the participants. The tobacco companies of course could say whether they would or would not put the plaintiff on their tax-free lists, in effect licensing it to make sales to ships in the Port of Philadelphia. But this in reality was simply saying "Yes" or "No". Here the five companies all said, "No". The suspi cion which would be created by the unlikelihood of numerous firms reaching one of many possible conclusions is lacking and therefore the unanimity of the tabacco companies' rejection of the plain tiff's application can afford no substantia1, basis for an inference or consbiracy." (205) 0025-1186 [151] -3- The following cases have specifically placed uniform prices in their true context: In Pevely Dairy Co. vs. United States, 178 F 2d 363 (8th Circuit 1949), cert, denied, 339 U. S. 942 (1950) the Court stated: "The milk as handled by appellants was a standardized product. Its cost items being substantially^identi cal for both appellants, uniformity in price would result from economic forces. Economists called as expert witnesses testified that in a market such as the fluid milk market in St. Louis, where there were standardized major cost factors, uniformity of price is to be expected, (emphasis ours) Accordingly, "We are clear that mere uniformity of prices in the sale of a standardized commodity such as milk is not in itself evidence of a violation of.the Sherman Anti-Trust Act." (at 368-369) ' 1. The District Court in U. S. v. Twentieth Century Fox (supra) as well as the Court of Appeals in frevely bairy quoted from Chamberlin, The Theory of Monopolistic Competition: "One of the conditions of the problem must be the complete indepen dence of the two sellers, for obviously, if they combine, there is monopoly. This independence must, however, be interpreted with care, for, in the nature of the case, when there are only two or a few sellers, their fortunes are not independent. There can be no actual or tacit agreement -- that is all. Each is forced by the situation Itself to take into account the policy of his rival in determining his own, and this cannot be construed as a "tacit agreement" between the two. This is irue, no matter how complex the manner In which his competitor's policies figure in the determination of his own. A certain move, say a price cut, may be 'advan tageous to one seller in view of his rival's present policy, i.e., assuming it not to change. But if his rival is certain to make a counter move, there is no reason to assume that he will not; and for the first seller to recognize the fact that his rival's policy is not a datum, but is determined in part by his own, cannot be construed as a negation of independence It is simple to consider the indirect consequences of his own acts -- the effect on himself of his own policy, mediated by that of his competitor. Of course, he may or may not take them into account, but he is equally independent in either case." (emphasis the court's) (p. 31) llIfHpU [152] -4- See also Revere Copper & Brass vs. Economy Sales Co. 127 P. Supp. 739 (D. Conn. 1954) In Independent Iron Works vs. United States Steel Corp., 177 F* Supp. 743 (N. C. Cal. 1959) the Court stated: "Steel is a standardized product. The law is clear that even where there is proof of price uniformity in the sale of a standardized commodity, with or without price leadership, this is not sufficient to make a prima facie showing of agreement to fix prices (at 750 citing U. S. vs. International Har vester Co. (1957), 276 U. a. b93/4? a. Ct. 746 71 L'""E!3~T302.) To the same effect, see United States v. National Malle able and Steel Iron Castings Co., 1957 Trade Cases, Para. 68,:'.890 (N. D. Ohio) affirmed per curiam 358 U. S. 38 (1958). And in United States vs. Armour & Co. (See TRR. 124, dated II/26/63, page A9), which was an indictment under Section 1 of the Sherman Act, Defendants were acquitted in Federal District Court of Southern California.(L.A.) Acting on their motion, the Court stated that, while the evidence already presented, plus what the government said it still had to offer, might Indicate the exist ence of conscious parallelism in the supplier's pricing policies, it was not enough to warrant its submission to the jury. The Court ruled, after directing the Government to make an offer of proof as to the remainder of its evidence and extensive oral argument, that although there was proof of numerous meetings during 1958 and 1959 among representatives of the suppliers, the evidence tended to show only "conscious parallel business activities which is legitimate." Respectfully submitted. Henry T. fteath DUANE, MORRIS & HECKSCHER Attorneys for Defendant, Keasb'ey and Mattison Co. 0025-1188 [153] Harvard 0 ' '<SH? uf?i0<5iy"'Tii?g)fk 6 MANAGEMENT PROBLEMS IN 1993 The Editort 32 STOCK OPTIONS AT THE CROSSROADS John C. Baker 33 IS MARKETING A SCIENCE? Robert D. Buexetl 49 TRANSFERRING RESEARCH RESULTS TO OPERATIONS ~.,r James BrjswJtuinnjmdJameA A. Mueller lANAGER'S JOB --A SYSTEMS APPROACH Seymour Tiller 12 FEDERAL FETTERS FOR FEATHERBEDDERS Lyman K. Randall 98 PROTECT YOUR FREEDOM TO SUBCONTRACT Myron L. Joseph 193 TWELVE FABLES OF RESEARCH MANAGEMENT Peter F. Dnicker 109 COMMON SENSE IN SAMPLING Chatter R. Warton US NEW TREND IN FINANCE! THE NEGOTIABLE C.D. Warren A. Law and M. Cotyer Crum 127 WHAT KILLED BOB LYONS? Harry Levinson 145 THE CASE AGAINST CAPITALIZING LEASES Donald C. Cook 0025-1189 JANUARY FllftUARV, [154] Fact and Fancy on Identical Bids Despite government's all-out attack on them, identical bids may sometimes be more honest, more competitive, and more practical than any other kinds of bids. By Paul W. Cook. )r. The scene is the office of the purchasing agent of almost any sizable city or state govern ment. The representatives of four companies are gathered together with the agent, chatting pleasantly about how things have been since they last saw one another, which was the week before in a nearby county. The purchasing agent, hav ing previously requested sealed tenders to be opened on this date, carefully unseals the en velopes which contain the bids submitted by the companies represented in the room. Upon examination, he finds all bids identical to the penny. What he says and what he does at this point vary with his character. If he is at all typical, he mutters something under his breath about "competitive bids. . . . Hal" and tries to decide whether he will call for a rebid, put the bids in a hat and draw one, or divide the business. He also makes a mental note that this is one more occasion where he has to fill out a form report ing his bid results to the state attorney general and to the Antitrust Division of the Department of Justice. There, the identity of the bids will be duly noted by someone -- probably gimlet eyed and of a suspicious nature -- and the in formation filed. If events run the course that they have been running with great frequency in recent years, the information may appear again in an extended grand jury hearing, lasting 18 months or so, during which the companies' executives and their employees will incur con siderable loss of time, substantial cost, and very likely a great deal of mental anguish. In due course the companies involved may well find themselves in a criminal trial charg ing them with conspiracy. The boast that all a government attorney needs to get an indictment from a grand jury is the name and address of a major corporation may be apocryphal, but it could have been made whether it ever was or not. The companies are then faced with the additional cost and mental anguish that goes with trying to explain what originally seemed to be fairly simple economics. This will be in rebuttal to a government case which argues that identical bids -- plus perhaps some indis cretions such as salesmen exchanging competi tive bulletins in bars, or phone calls for Robinson-Patman purposes to inquire about possible discriminations -- are adequate circumstantial evidence that a criminal conspiracy has existed. Particularly if the government has insisted that the case be tried before a jury, the possibil ity of conviction cannot be considered remote. The trauma which follows a guilty verdict needi hardly be mentioned here. Let us now return to our purchasing agent. 67 0025*1190 [155] 68 Harvard Hus/ir< " ih'Wcir Perhaps an hour later, in an identical scene, he opens bids from three contractors ami finds that one is about 10% above the low and the other almost 30% above the low. In this ease, our prototype happily awards the contract to the low bidder and makes a mental note to remind bis superior of how many thousands of dollars ho anil competitive bidding have saved the govern ment. The superior then feels compelled to make a speech. The second ease has proved to him what he knew all along -- that identical bidding is costly to the taxpayer and unnecessary. To com plete this little drama, a chorus of newspaper writers should be chanting with all the fervor of a neighborhood busybody that "where there's smoke, there must be fire." And so we have yet another instance of popu lar unuwarcncss of business facts and political capitalization thereon. However, to really un derstand the phenomenon, one first must place himself in the position of the purchasing agent. Seeing only one bid among many, observing that competitors do in fact know each other ami speak cordially to one another, largely unaware of what has been going on in the selling industry, he must be forgiven some of his suspiciousness. He has an all-too-common form of "tunnel vi sion," by which an isolated instance lost against its background leads to distorted and unfortu nate inferences. Realities of Practice To find the true meaning behind the observed differences in bid practices, we must first under stand a few essential facts about both competi tion and conspiracy. But, first, let it be noted that we are talking about conspiracy in the overt sense of competitors getting together and agree ing on a course of action. We are not broad ening the term, as is sometimes done, to include actions independently arrived at by competitors who systematically take account of each other's actions. (Actually, there seems to me to be a quite hazy area lying between implied agree ment and parallel action. Tire very haziness of this area makes the extensive use of criminal proceedings by the Department of Justice in such uncertain cases seem wholly unwarranted. Criminal actions here could lead to the most unpleasant of antitrust results, where a man who has always conducted himself with what he thought was scrupulous regard for the law finds he was a "criminal'' all along.) When I use the term "conspiracy" here, 1 will coniine myself to those situations where there has clear ly been some hanky-panky between executives and where there has been no reason in recent years for anyone but a Neanderthal-type to think that the relationship was anything other than illegally conspiratorial. Illusion of Comparison The first observation a commonscnsc inquiry dictates is that bids in either scene in the pre ceding example may or may not have been ar rived at conspiratoriallv. It will be shown later how identical bids may be arrived at without conspiracy; for the present, the fact to note is that there arc many forms of conspiracy that re sult in nonidentical bids. Territorial agreements and rotation systems are two examples. In fact, if I were asked, I would certainly bet that most conspiracies involving public tenders are con spiracies to rotate the low bid -- and the busi ness. That is, the bidding firms have agreed among themselves who should get the business, and they purposely let that company be low. Surely, these conspiracies arc less suspicious in their overt appearance, more certain in their results, ami no more difficult to administer than any other kind of conspiracy. It is worth noting that the suit involving the electrical-equipment manufacturers, which seems to have kicked off the whole current drive on identical bids (there have, of course, been other such storms since the famous Temporary National Economic Com mittee investigations in the late 1930'$), was precipitated by a protest originating in the TVA about bills that seemed suspiciously close. It was a rotation system that started all the furor, not an identical-bid system. Price Following The second observation is that identical bids may appear with considerable frequency in an industry in which price competition is flourish ing by modern business standards -- without any conspiring at all. To illustrate: In the recently tried case Involving rock salt sold for ice control,1 there was a substantial degree of identity of bids, and the three major sellers ad mitted to corporate strategies aimed at achieving identical prices. However, the price had fallen by more than 25% during the period covered by the 1 United Statet v. Morton Soil Company et at., 4-61 CH. 65. (Verdict returned for defendant* June 7, 1962.) 0025-1191 [156] indictment. Not only was there no conspiracy, but the identical bid policies of the major competitors had not prevented a price war that continues to this day. It may take only one hid to break a market; the market may then stabilize quickly at the new level, creating a situation like the foregoing, and stay at that level for only a short time until the market changes and quickly stabilizes at a new er level. Parallel Strategics As a third observation, note that cither a rota tion system or an identical-bid pattern may be evolved by what is known technically as parallel action in a market with an oligopoly structure. ("Conscious parallel action" means a price or other strategy followed by companies that, while not making actual agreements with each other, take account of the expected price behavior of rivals and act accordingly. "Oligopoly" means u market served by relatively few firms.) Price leadership, which of course implies price fol lowership, is one form of parallel action in mar kets involving relatively few firms that can lead to identity of bids. What is frequently not realized is that many firms follow parallel strat egies, arrived at by their managers' independ ent, best business judgments, where the effect is a systematic rotation of business. Conscious rotation at nonidcntical prices can frequently be observed among contracting firms that watch bid results, estimate the sliop load which their rivals have, predict with consider able accuracy whose "turn" it is to be low, and out of "courtesy" submit bids on business when they may not want and certainly do not expect to get the work. Indeed, "courtesy bid" is a common expression in the industry. Without this practice, many bids would be rejected for lack of a sufficient number of bidders. Of course, in such a situation wc have no way of knowing simply from an examination of bids whether the price in the low bid is unreason ably high or not. Actually, how much bidding is done except in oligopoly situations? If the industry were not an oligopoly, a government purchasing agent would not seek bids but would simply buy from the market. And what do bid results actually tell us about the price situation? There is no way to know, simply front an examination of bids, whether the existence of an oligopoly has raised, lowered, or even affected prices. Identical Bids 69 In light of the foregoing, we can state three conclusions: As a general proposition, there is no reason to be more suspicious of identical bids than of non identical bids. There is no reason to infer that nonidentical bids reflect the existence of considerable price com petition while identical bids reflect the absence of competition. True conspiracies between competitors are no more likelv to result in identical bids than they arc to result m nonidemic.il bids. Given these conclusions, I do not see how a case can be made for concentrating investiga tions on identical-bid situations while neglect ing situations where the bids arc different just because they are different. Such a policy shows a lack of understanding of both identical bids and nonidcntical bids. Conditions Favoring Identity A number of rather common business condi tions make it likely that companies will want and be able to achieve a high degree of identity in their bids without conspiring. Executives often find themselves trying to explain what these conditions arc. Let me review them: 1. Many hulmtrics are characterized by rela tively few idlers. To appreciate the importance of this, consider the opposite kind of situation. When the number of firms increases, the possibility of getting in a loiv bid without retaliatory action in creases, the difficulty of specific retaliation without beginning a general price war rises substantially, and the mechanical problem of keeping track of what everyone is doing may become so complex as to l>c virtually impossible to manage. Hence, nonidenlh-al bids are likely. Identical bids are there fore a manifestation of oligopoly, a condition which may cause social problems but, hopefully, is not a crime, since such a conclusion would devastate our society and overload our prisons! Indeed, as pointed out earlier, any parallel action is a mani festation of oligopoly, and one can hardly find busi nessmen who do not take account of specific actions of specific rivals. 2. There is often reasonable opportttnity for retaliatory action in American business. One rea son bids from foreign sources arc frequently low is that retaliation is difficult, even though the num ber of sellers in total is small. The same situation may occur when the size or strength of companies is very disparate or where distance from regular market areas makes the dangers of initiating a price war not worth the gains to be expected from strik- 0025-1192 [157] 70 Harvard! Hastings Jictjcu' ing a counterblow, for example, in some imlustries small producers regularly dump small amounts of their output at lowered prices on otherwise stable markets. So long as these small producers do not make too many moves in the direction of becoming large producers, their price cut*, mav )>o ignored and, in effect, their volume conceded. Therefore, identity is most to be expected where rivals of considerable strength face each other on a more nr less continuing and substantial basis. 3. In many business situations the product is well specified. Of course, it need not be n stand ardized homogeneous product. If there are clearly established market prices for the extras or for minor differences that may exist, conditions are still right for price identity. 4. Often a product involves so small a trans portation cost that the cost is typically absorbed by the seller, or else the product is transported by a common carrier or other transportation agency at costs determined from trade sources. Bear in niind that if freight is an important factor in determining delivered prices, then in order to enter identical bids a company must be able to predict not only the price but the transportation costs of its competitors. To have predictable trans portation costs, the product should be moved in fairly simple am) routine ways, such as by mil at a well-known freight rate or by regulated truck. It might be well to point out here that there have been and still may be some artificial am! arbitrary freight systems, such as the basing-point svMcm and some phantom-freight systems, which mav well be beyond the pale of legality. (An example of lire latter is an industry which always quotes delivered prices based on rail shipment, regardless of the means of transport actually used.) Legitimate iden tical bids should involve neither artificial basing points nor formula-determined phantom freight. 5. Frequently the quantities involved in indi vidual bids are relatively small with icspcct to total output of the competitors, and/or the bid business is relatively small compared to total mitput sold iu other uviys. The less important an individ ual bid is, and the less important hid business is generally to the companies in the industry, the less likely it is that anv of them will be willing to chance breaking the whole market for a small in crement of stiles. In effect, the situation is such that, although they ask for bids, purchasing agents arc being quoted the existing market price, and the business involved in the bid is not so large ns to warrant cutting the market price in urdcr to secure the business. Minimizing Risk Where such circumstances exist in combina tion, it is certainly not unexpected that compa nies should of their ow n free will and w ithout consultation adopt policies (hruugh which ;hcy attempt to enter bills identical to those of their competitors. This is a strategy in\ olving a mini mum risk of a destructive price war. Also, and frequently forgotten, it is a strategy which does not require the coinpum to forego the use of price as a competitive weapon; after all, the de cision stdl has to be made on the price at which the company will attempt to be identical. As previously shown, the market may move up or down in various competitive maneuvers, even though the strategy of entering identical bids as a general rule holds If a company wants to cut prices on a selec tive basis to try to steal a market from its com petitors, it can carry out this policy far more advantageously in dealing with private indus trial customers, where an attempt can be made to sw-car the purchasing agent to secrecy regard ing the concession. Even if price cutting to get particular orders is a part of the total pricing strategy, it is far less risky to do it in private instead of on public bids, where everyone in the industry is immediately informed of the price quoted. Indeed, as will be discussed presently, the very nature of public bids is such that they supply lhe information to sellers which makes it possible for the latter to estimate competitors' bids. This availability of information is the Anal element required for companies to want to, and be able to, enter identical bids. Impact of Public Practices There arc various aspects of public purchas ing practices which greatly enhance the prob ability of identical bids appearing in public ten ders. The first of these, as just indicated, is that when public tenders ask for open price compe tition, they call for companies to do in the spot light of a public opening what is far better done in secrecy. When numerous bids are entered over a period of time, each company has abun dant data derived from the past openings to use in predicting rivals' behavior in upcoming bids. A most ironic fact is that government purchas ing practices result in information being made available to competitors which would very like ly be unavailable otherwise just because it would be illegal for competitors to get together and to collect and disseminate it among themselves. A public bid opening reveals the name of the cus tomer and of each seller and his price, and the price-cutter is immediately idcntilied and sub- 0025-1193 [158] jectcd to retaliatory action by his competitors. For this reason, open price reporting systems, through which trade associations have at times attempted to supply such information, are gener ally looked on with disfavor, and properly so. The thought is sometimes expressed that the purpose of competitive bidding is to protect buy* ers from collusion among sellers. Howeser, its original purpose was clearly to protect against collusion Irctwecn corrupt purchasing authori ties and unscrupulous businesses. The spotlight of public bidding docs do a great deal to pro* tcet against dishonest companies and purchasing agents; it would, however, he hard to find a de vice less calculated to foster open and aggres sive competition among sellers. Ii, in fact, open bids were a way to buy cheaply, it could be assumed that private business would follow the practice. In fact, however, private busi nesses very rarely reveal the prices they have been quoted; indeed, such data arc a most close ly guarded secret. Thus the tendency to receive identical bids of which governmental purchasing agents com plain is both made possible and encouraged by their purchasing practices. Without public openings, competitors would not have the knowl edge with which to enter subsequent identical bitls, nor would they run so great a risk of re vealing themselves as price-cutters, hut this is not the only way in which the policies of public purchasing authorities encourage identical bids. Other ways are: Q The very frequent use of "inost favofai cus tomer" clauses in sales contracts -- These clauses require that a lower price given to some other pur chaser must retroactively be given to the present purchaser. The clear effect of such clauses is to present each bidder with the realisation that to cut his price on a single bid involves cutting his price for many previous transactions ns well as for fu ture business he may obtain. Thus, while some purchasing agents seem to expect competitors to figure closely and aggressively compete for their par ticular small piece of the total industry demand, they also expect to do as well as anyone else in the market. Clearly, they cannot have it both ways. It should also be noted that the most-favoredcnstoincr practice frequently applies as a matter of courtesy and of expectation, even though there is no formal clause in the contract. Also, it not in frequently happens that a purchasing agent docs not see a price cut subsequently grimted umler such a clause, since tills information mav l>e routed to another department vvilhin the government. Identical (lids 71 < The temlenc) for governments to ash for cither full-icqnitcH/cnts contracts o> for qnrntities so hup: that it is not conunaciaUv feasible or irisc for some ut nil of the sella s to sceh a whole onlcr -- W hen all that any uunp.im wants or can handle is a piece of the total business, and where a compam would get none if it bid high ami all if it bid low, there is no alternative except to attempt to enter ;m identical bid. Realistic Appraisal Clearly, when all the above factors are pres ent and operative, to protest against identical bids is to expect not uierelv price competition, but consistent, self-ilestruetive belligerency and an eternal condition of price warfare. A busi ness manager who recommended a wholly in dependent bid strategy in such circumstances would be regarded as incompetent, if not a sui cidal maniac. Most businessmen know this, and many luve at one time or another learned it the hard way. This being so, the companies have no practical alternative other than to attempt to enter identical bids; and given the information which governmental purchasers, in toto, gratui tously supply them with, there is no reason why they should not achieve their policy with rela tive success. It may be that it is a good tiling for society at large that identity and reasonable stability can he achieved. Conversely, it may he that the practice raises serious problems for public pol icy. i pass by discussion of that issue. How ever,`the conclusions do seem inescapable that identity of bids is not necessarily worse than the alternatives actually available, given the struc ture of the American economy; that identical bids are no more suspicious by their very nature than any other kind of bid; and that a wholesale and discriminatory attack on businesses engag ing in idcntical'bid practices is illogical, unwar ranted, and very possibly unwise in view of the alternatives. Constructive Action Certainly the easiest remedies for whatever problems identical bids may present arc in the hands of the government purchasers themselves. Fur instance: * If purchasing agents, particularly when buy ing seasonal products, did not reveal bid results except to their auditors until some substantial time hail passed, the information which makes identical bidding possible would be cut off. 111I1I1I 0025-1194 [159] 72 Ham/nf Business /{I'lifti' Request:, for the Mthtnissicm ol bids could well be phrased so as lo permit acceptance of ii>\\ bids for ports of the total order. Award practices could be adjured so ns to make the penalties for identical bidding somewhat greater. Apportioning the business roughly according to the pre-existing market shares of the bidders, which some purchasing agents do, hardly pro vides an incentive to try to steal a single hid. On the other hand, suggestions such as recom mending that the award always he given to the smallest bidder seem wholly impractical; quite possibly he does nut want it and is not able to handle it; and the purchasing agent may well be doing him a real disservice if he insists. So far as the bidding companies themselves arc concerned, there seems little that they can do except to try to educate their customers and their organizations regarding the problem, its causes, and its probable consequences. Since much of the problem seems to have originated in the "tunnel vision" of some purchasing agents who see only identical bids and understand nothing of underlying industry trends or devel opments, wide dissemination of such informa tion should be useful. Because the federal government is in the midst of a drive against identical bidding, sales men and others in the company must he warned about the possibilities of a circumstantial-evi dence type of case being brought against the firm, with a jury being asked to draw an infer ence of agreement from casual contacts between competitors. Since industries where there has been identical bidding haw been made targets, evervone connected w ith them must lie made aware ol the need lur esci pcion.d iuie m social or husnu's contacts with members ol compet ing firms. fiuallv, companies imolwd in such cases should light. Cl ranted that the risk.-, of comesting a suit and creating a public aeon) mav he gre.it, and granted that courts ami juries nav make mistakes espeuallv w here business del aid ants are imolwd, and granted that the uM of such mistakes is enormous, to tail to ligh., to take a m>/o plea or a consent order, dignifies and encourages a misguided public policy. 1 el us hope, therefore, first that companies will he in nocent of conspiring and, secondly, lh.it they will [iglu hack hard when their innocence is challenged either by imputation or in corn-.. As for the federal government itself. w< can w'ish that it would reconsider ami attempt to build its investigation of collusion in bids on u more rational basis: he less free in the use of grand juries in seeking criminal indictments in the absence of clear evidence of conspiracy; and be a little more sensible in the matter of consent orders. For example, what good does it Jo to seek (as is l>cing done in at least one case) an order requiring companies lo state the derivation of their bids in terms of factory price, s recial charges, and transportation charges? Such an order serves only to remove, when bids arc made public, what little uncertainty may remain in competitors' mimls about the components of a delivered price. Perhaps the laet that xu:h or ders have been sought shows how little the prob lem is understood. 0025-1195