ABSTRACT
ADAM SMITH, Wealth of Nations, Bk, II. THE simple formula by which Adam Smith thought to exhaust the price relationship between manufacturers and retailers-a formula which might have filled him with satisfaction in view of the multiplicity of regulations existing under corporation rule -is no longer true. Wherever manufacturers or wholesalers trade in price-marked branded goods, they have adopted to some extent a leadership not only over retail prices, but also over the margins to be observed by the re-sellers, thus regulating their gross profits on such goods. The system has not simplified the relationship between manufacturers and re-sellers for, as we have seen, neither manufacturers nor their associations, nor those of the retailers, have been able in general to draft comprehensive standards for such margins, which would guarantee an objectively-" fair" profit to every retailer. The manufacturer wavers between the Scylla of too high margins;' which are likely to attract undesired competitors to the trade and undermine the position of many existing retailers perhaps to his own disadvantage, and the Charybdis of too narrow margins, which might arouse dissatisfaction among re-sellers and their trade associations and drive them to prefer his competitors' goods. Conditions definitely vary from those existing with cartels. Cartel products are in general uniform; their prices concern all members alike; prices may be fixed and sale-quotas allotted for each member. In endeavouring to dominate price-fixing on the retail market, manufacturers may agree to certain price standards for their own individual products and to strong measures to keep up the price of branded goods in principle, but as regards consumers' acceptance manufacturers are left free and independent. No system of quota allocation has yet been introduced by manu-
facturers' associations in their agreements with re-sellers' trade organisations; no limitations are set on their individual advertising ventures; they sell their goods even under the price-fixing system, as the Committee on Restraint confirmed, " in more or less free competition with other manufacturers to the wholesale or retail trader".
